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Community Development

Can Home Loan Modification through the 60/40 Plan Really Save the Housing Sector?

An Atlanta Fed Real Estate Research blog raises questions about a recent proposal called the "60/40 Plan" that hinges on principal forbearance strategies as a way to improve the housing market. Though principal forbearance can be a useful loss-mitigation tool, according to Atlanta Fed economists Scott Frame and Kris Gerardi, the effectiveness of such a plan depends on a variety of factors, including economic and institutional conditions.