Help for Homeowners with FHA Loans

If you have an FHA-insured loan and are struggling to make mortgage payments, HUD has programs to help you avoid foreclosure.

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The Federal Housing Administration (FHA), which is a part of the U.S. Department of Housing and Urban Development (HUD), offers several options to homeowners with FHA-insured loans who are facing foreclosure. Read on to learn more about how the FHA Home Affordable Modification Program, Special Forbearance for Unemployed Homeowners, and FHA Second Lien Program can assist you if you are having trouble making your mortgage payments.

(To learn about government programs that can help you you don't have an FHA-insured loan, see our Government Foreclosure Assistance Programs topic area. And for information on other ways to deal with foreclosure, see our Alternatives to Foreclosure area.)

FHA Home Affordable Modification Program (FHA-HAMP)

FHA-HAMP is part of the government’s Making Home Affordable Program. The FHA-HAMP program assists FHA-insured borrowers who meet HAMP eligibility requirements in avoiding foreclosure by permanently reducing their monthly mortgage payment through the use of a “partial claim” combined with a loan modification.

A “partial claim” is an interest-free loan from HUD that does not have to be repaid until the first mortgage is paid off or until the borrower no longer owns the property.

FHA-HAMP works by using a partial claim to:

  • reinstate a delinquent loan that is up to 12 months delinquent, and
  • buy down the first mortgage loan (up to 30% of the unpaid principal balance as of the date of default).

This, combined with a loan modification, enables homeowners with FHA-insured mortgages to reduce their monthly mortgage payments and avoid foreclosure.

FHA-HAMP Trial Payment Plan

To be eligible for FHA-HAMP, the homeowner must successfully complete a three-month trial payment plan. Payments must be made on time and will be in the same amount as the future modified mortgage payment. If the homeowner fails the plan by not making payments on time, he or she is no longer eligible for FHA-HAMP.

For more information about FHA-HAMP, go to http://portal.hud.gov/hudportal/HUD?src=/hudprograms/fhahamp or contact the FHA National Servicing Center at (877) 622-8525.

FHA Special Forbearance for Unemployed Homeowners

Unemployed homeowners with FHA-insured loans may be eligible for a 12-month forbearance period, which temporarily reduces their monthly mortgage payments.

Generally, the forbearance plan will last a full 12 months, but it can be terminated if the borrower:

  • abandons the property
  • informs the loan the servicer he or she is no longer looking for work
  • informs the loan servicer he or she will not abide by the terms of the forbearance agreement
  • falls 60 days behind on forbearance payments, or
  • finds a job and the loan is reinstated.

Once a forbearance period is completed, the loan servicer must evaluate the borrower for further assistance programs. If the borrower does not qualify for further assistance, the loan servicer must notify the borrower in writing and provide a reason for denial, such as the delinquency exceeds 12 months or the borrower cannot make a partial payment. The servicer must give the borrower at least seven calendar days to submit supplemental information that may change the results of the evaluation.

All FHA-approved servicers must participate in FHA’s loss mitigation program, which includes the special forbearance program. Read HUD's press release about FHA’s special forbearance program for unemployed homeowners.

FHA Second Lien Program (FHA2LP)

If the loan servicer of your first mortgage agrees to participate in a FHA Short Refinance and you have a second mortgage on the same property, you may qualify for a mortgage reduction or elimination of that second mortgage through FHA2LP. Under this program, the total amount of mortgage debt after the refinance cannot exceed 115% of the home’s current market value.

You may qualify for FHA2LP if all of the following criteria are met:

  • the servicer of your first mortgage agrees to a FHA Short Refinance
  • the mortgage originated on or before January 1, 2009, and
  • you have not been convicted of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction within the last ten years.

Not all loan servicers participate in FHA2LP. If you are interested in the program, call your mortgage servicer and ask if they participate in FHA2LP.

For more information about FHA2LP, go to www.makinghomeaffordable.gov, select “Explore Programs”, then click on “View All Programs” and select “Second Lien Modification Program for Federal Housing Administration Loans (FHA-2LP).” You can also contact the FHA National Servicing Center at (877) 622-8525.

Option for Non-FHA Loans: FHA Refinance for Borrowers with Negative Equity (FHA Short Refinance)

If you are underwater (you owe more than your home is worth) on your mortgage and would like to obtain more favorable mortgage terms, you might want to consider an FHA Short Refinance. If you qualify, your lender would reduce the amount you owe on your first mortgage to no more than 97.75% of the home's current market value.

You may qualify for a FHA Short Refinance if all of the following criteria are met:

  • the mortgage is not owned or guaranteed by Fannie Mae, Freddie Mac, FHA, VA, or USDA
  • you owe more than the property is worth
  • you are current on your mortgage payments
  • the house is occupied as your primary residence
  • you are eligible for the new loan under standard FHA underwriting requirements
  • your total debt does not exceed 55% of your monthly gross income, and
  • you have not been convicted of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction within the last ten years.

Loan servicers are not required to be a part of the FHA Short Refinance program, so if you are interested, call your mortgage servicer and ask if they participate.

For more information about a FHA Short Refinance, go to www.makinghomeaffordable.gov, select “Explore Programs”, then click on “View All Programs” and select “FHA Refinance for Borrowers with Negative Equity (FHA Short Refinance).” You can also contact the FHA National Servicing Center at (877) 622-8525.

For More Information

To view the FHA National Servicing Center’s loss mitigation website, go to www.hud.gov and search for "FHA National Servicing Center Loss Mitigation Services."

For information about FHA’s loss mitigation programs, go to www.hud.gov and search for "FHA NSC Loan Servicing and Loss Mitigation Frequently Asked Questions."

Additionally, you can contact your lender or loan servicer directly to ask about available foreclosure prevention options for FHA-insured loans.

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