In a little-publicized but far-reaching shift in practice, mortgage lenders are allowing growing numbers of homeowners who've missed multiple monthly payments to remain in their homes, rather than pushing them toward foreclosure, as lenders traditionally have done.

During the past two years alone, the change has allowed thousands of families nationwide to avoid the financial nightmare of losing their homes. Simultaneously, it has enabled lenders, investors and mortgage insurers to save millions of dollars in losses from foreclosures per year. The two largest participants in this industry shift--Fannie Mae and Freddie Mac--estimate that they now save $100 million annually apiece by working with defaulting homeowners, custom-crafting solutions to families' problems rather than forcing them out of their homes.

Fannie Mae has doubled the number of what it calls "loan modifications" and "repayment plans" for seriously defaulting homeowners during the last two years--up from 7,600 in 1997 to an estimated 16,000 this year. More significant, the percentage of borrowers receiving customized attention has jumped. In 1997, 22,000 of the 34,000 Fannie Mae borrowers who were seriously in arrears--typically four or more months behind on payments--ended up going to foreclosure. This year, fewer than half--14,500 out of 33,000 seriously defaulting borrowers--are expected to go to foreclosure.

At Freddie Mac, the shift in approach is comparable: Customized workouts and repayment plans have increased from 20 percent to 50 percent of all troubled loans, effectively cutting the number of borrowers forced into foreclosure by almost half.

Other major players in the home mortgage industry are following suit. Over time, the net effect could be a radical transformation of the traditional relationship between families who fall into financial distress and their mortgage creditors. Lenders increasingly are eager to listen to borrowers' problems--be they loss of a job, illness, divorce or the death of a breadwinner--and to attempt to work things out with repayment arrangements the borrowers can afford, or even by lowering the interest rate on the mortgage note.

A recent letter to a Florida couple from Norwest Mortgage Inc., working with Fannie Mae, typifies the new approach. The couple had missed payments for several months, but the tone of the letter--"Dear Jack and Jean"--was personal and compassionate.

"We want to help you avoid foreclosure and the possible loss of your home. You may be experiencing financial difficulties, due to reasons beyond your control, which have resulted in your falling behind on your mortgage. . . . We are interested in working with you to come up with [a] solution. . . . "

Among the options available:

* A repayment plan "that will fit your budget and bring your account current by the end of the plan."

* A loan modification that "adds [your] delinquent interest, taxes and/or insurance payments to your unpaid balance. . . . We may [also] be able to extend the repayment of the past due amounts over the remaining term of your loan."

* A partial claim that "is designed to bring your account current by creating a second lien on your property for the amounts that are delinquent."

Both Fannie Mae and Freddie Mac have teams of specialists and counselors who attempt to tailor solutions for people like Jack and Jean by looking in detail at their entire financial picture. In one recent case, according to Joe Sakole, Fannie Mae's vice president for loss mitigation, counselors analyzing the delinquency of a 72-year-old Houston widow discovered that she was paying far too much in property-insurance premiums--she had the $10,000 contents of her home insured for about $200,000--and that she qualified for a big reduction in her property taxes because of her senior citizen status.

With two large monthly expense items cut sharply, and with a loan modification that rolled her arrears into her loan balance with an extended term, the counselors helped stabilize the woman's financial situation. She's been paying on time ever since, according to Sakole.

Outreach like this comes with the help of some high technology behind the scenes. Both Freddie Mac and Fannie Mae use sophisticated electronic behavioral models plugged into credit bureau data files to spot people who can benefit from early intervention. Phil Comeau, Freddie Mac's vice president for nonperforming loans, estimates that "the probability of helping a borrower save his home decreases by 50 percent with every 30 days" after the borrower has fallen two months behind on the mortgage.

"So the message to borrowers is, 'If you know you're in trouble, get to your lender as soon as possible,' " says Comeau. "People need to tell their lender, 'I've got a problem--I lost my job, or I've had an illness'--or whatever the trouble is."

The sooner the better, if you really want to keep your home.