Forestalling Foreclosure

A subprime servicer has devised a plan for modifying loans to keep people in their homes

Bob Croslin for TIME

Ron Faris, president of the loan servicer Ocwen, tosses a foreclosure sign. The Archons, right, fell behind on their mortgage after John's paycheck — he's a manager at a roofing company — took a major hit.

If you think subprime lenders are the loan sharks of real estate, then loan servicers--the outfits that collect mortgage money and run the books--are the enforcers. Their job is to keep the dough coming, no matter what. Yet Ocwen, one of the nation's largest servicers of subprime loans, has rewritten its role as the heavy and may have an approach to modifying delinquent loans that could slow the wave of foreclosures undermining the economy.

Last year, nearly a million houses were lost to foreclosure. That number could easily rise by millions over the next few years, promising more economic pain. The...

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