Mortgage relief programs: How to find one you may qualify for

Mortgage relief programs are designed to help homeowners facing financial hardship stay in their homes.

Your mortgage may be the biggest bill you pay every month, and unexpected circumstances like a job loss, health crisis or other expenses can make it difficult to keep up with mortgage payments. Mortgage relief programs may help. Let’s look at the different types of relief, how they work and who’s generally eligible for each program.

• What is mortgage relief?
• What types of mortgage relief are available?
• Are there government mortgage relief programs?
• Beware mortgage relief scams

What is mortgage relief?

Mortgage relief can come in different forms, but generally mortgage relief programs aim to help homeowners who are struggling to make their monthly mortgage payments or who may be facing foreclosure.

The federal government, some state governments and lenders can all be sources of mortgage relief. The type of relief you might qualify for will depend on multiple factors, including your circumstances and who owns your mortgage — a private lender or a federally backed one.

What type of mortgage do I have and who owns it?

To qualify for certain types of government mortgage relief, your mortgage must be backed by either the federal government or a government-sponsored enterprise such as Fannie Mae or Freddie Mac.

If your original lender has sold your mortgage, you may be unsure who currently holds your home loan. Here are a couple of things to try in order to find out.

• Use the FannieMae or FreddieMac lookup tools to see if one of them owns your mortgage.
• Call or write your mortgage servicer and ask it to provide information about the owner of your mortgage.

What types of mortgage relief are available?

Multiple types of mortgage relief programs are available. Some are generally available to everyone (refinancing, for example) — while others (such as COVID-19 forbearance) are for people experiencing hardships caused by specific circumstances.

Mortgage forbearance programs

Forbearance means your mortgage lender agrees to temporarily pause or lower your monthly mortgage payment for an agreed-upon period of months. But you’ll have to catch up on the reduced or paused payments eventually, so understanding how and when your lender will expect you to do that is key.

Loan deferment vs. forbearance: What works for your student loan or mortgage?

Mortgage refinancing

When you refinance a mortgage, you apply for a new loan and use the proceeds from that loan to pay off your original mortgage. If your credit is good, you may be able to secure a new mortgage with more-favorable terms than your old one, which could result in a lower monthly payment.

But there are caveats. If missed payments have already affected your credit scores, it may be more difficult to refinance and get better terms than you have on your existing mortgage. And, if you qualify to refinance, you’ll need some money to cover closing costs.

Ultimately, refinancing may make the most sense if your credit hasn’t taken a hit and you’re still current on your mortgage.

Learn more about refinancing a mortgage.

• How does refinancing a mortgage work?
• When is refinancing a mortgage worth it?

Loan modification

If you’re struggling to make mortgage payments, you can ask for a loan modification. This is a scenario where the lender agrees to permanently change the terms of your mortgage to help you better manage your payments in the future. A lender may agree to reduce your interest rate, give you more time to repay the loan or allow you to add missed payments to the loan balance instead of foreclosing over the missed payments.

Take note that the federal government’s Home Affordable Modification Program, which allowed eligible homeowners to have their monthly payments reduced, is no longer available.

Reverse mortgages

Generally used by older homeowners, a reverse mortgage can allow borrowers to get cash for the equity in their homes.

Borrowers must pay property taxes and homeowners insurance but don’t have a monthly mortgage payment. Instead, the amount they borrowed, plus interest, FHA insurance fees and other fees, gets paid either by the borrower when they move out of the home or by their heirs when they pass away.

Unlike traditional mortgages, where you make payments and pay down your balance over time, reverse mortgage balances rise. It’s possible for a reverse mortgage balance to eventually exceed the value of the home. But if their reverse mortgage is covered by FHA insurance, borrowers (or their heirs) aren’t required to pay the portion of the loan balance that exceeds the home’s value.

Learn more about reverse mortgages: What is a reverse mortgage?

New payment deferral option

If your Fannie Mae- or Freddie Mac-backed mortgage is already in forbearance because of coronavirus-related financial hardship, you may be able to put off making up your delayed or reduced payments until you sell or refinance your home, or until your mortgage reaches maturity.

The Federal Housing Authority, Fannie Mae and Freddie Mac are requiring mortgage servicers to evaluate borrowers’ financial situations to decide how they should repay the deferred mortgage payments. Deferral is one of several options.

Are there government mortgage relief programs?

The federal government and some state governments provide mortgage relief programs designed to help homeowners struggling to make their mortgage payments.

• Hardest Hit Fund programs, available in 18 states and the District of Columbia, help homeowners with loan modification, mortgage payment assistance and transition assistance. Dec. 31, 2020, is the last date for applications, but deadlines vary by state and may be sooner.
• Flex modification programs may be available for mortgages backed by Fannie Mae and Freddie Mac. If you’re eligible, the programs may help you lower your mortgage payments and avoid foreclosure. Talk to your mortgage company to see if you’re eligible.
• Federally backed loans may also be eligible for COVID-19 related relief. Measures vary, but you may be able to receive loan forbearance for up to 12 months, have penalties or late fees waived, get your loan modified or payment deferral. Talk to your loan servicer to see what aid might be available to you.

Beware mortgage relief scams

Experiencing a stressful financial hardship can leave you vulnerable to scammers, and mortgage relief scams can prey on your fear of foreclosure. During times of widespread financial crisis, scams may increase and tactics become more aggressive and convincing.

It’s important to be alert for signs that a mortgage relief company may really be a scam, including …

• Demanding upfront fees. It’s illegal to charge upfront fees for mortgage assistance services.
• Promising to get your loan modified. Companies aren’t allowed to make claims they can’t substantiate, or that are false or misleading.
• Asking you to sign over the title to your home. Scammers often ask you to “temporarily” sign over the deed to your home.
• Asking you to sign papers that you don’t understand. Never sign something you don’t understand. Consult a lawyer if something is too complicated, and never sign documents that have blank spaces to be filled in later, or that have errors or false statements.
• Telling you to begin sending payments to someone other than your mortgage company. Always make mortgage payments directly to your lender.
• Telling you to stop making payments. If a company tells you to stop making payments, it’s required to also inform you of the possible negative consequences, including foreclosure and damage to your credit.