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Publication Date

March 2009


Roberto G. Quercia


The center’s long-term studies on affordable home lending and recent research on loan modifications provide insights and implications for policy to guide key aspects of President Obama’s Making Home Affordable Plan.

We find that loan modifications that reduce mortgage payments significantly reduce foreclosure. That support the plan’s primary features. Systematically modifying and refinancing mortgage loans to reduce payments will prevent many foreclosures.

Further, reducing rates will provide substantial relief to many homeowners, but those who owe more than their house is worth will remain vulnerable to default. A more explicit use of principal reduction in appropriate situations should help save more homes.


Topics(s): Affordable Homeownership, Default, Bankruptcy, & Foreclosure, Housing Policy, Mortgage Finance