I Lost My Job, Can I Get Help With My Mortgage?

If you're unable to make your mortgage payments, your lender may eventually begin the foreclosure process. Because foreclosure not only means losing your home but also significantly hurts your credit, it's important to act quickly and proactively to explore options that can help you deal with your mortgage payments.

Depending on your circumstances and where you live, you might be able to get help through a government or lender program that:

• gives you a break from making payments until you get back on your feet
• modifies your loan to reduce your monthly mortgage payments permanently, or
• provides temporary financial assistance to pay overdue or future mortgage payments.

Many options are available to help you deal with your mortgage until you regain financial stability.

Does Losing Your Job Affect Your Mortgage?

Losing your job doesn't automatically alter your mortgage or your obligation to make payments on the loan. The original loan agreement, including the interest rate, payment schedule, and loan term, remains the same regardless of your employment status.

However, losing your job can make managing your mortgage payments difficult. Without a steady income, you might fall behind in payments. So, it's crucial to communicate with your loan servicer as soon as possible. Many lenders and investors offer assistance programs, such as forbearance or loan modifications, which can provide relief by reducing or suspending payments while you regain financial stability. Or you might qualify for a government program that provides mortgage relief to homeowners. Promptly exploring these options can help you avoid defaulting on your mortgage and a foreclosure.

Remember, losing your job doesn't automatically mean losing your home. But you should immediately take action to address the situation and explore all possible mortgage relief options that might help you while you're unemployed.

Programs That Give You a Break From Making Payments

If a temporary hardship, such as a job loss, causes you to fall behind in your mortgage payments, a forbearance agreement could help you.

How Do Forbearance Agreements Work?

With a "forbearance agreement," your mortgage servicer agrees to reduce or suspend your monthly mortgage payments for a set amount of time. At the end of the forbearance, you generally must resume the full payment and get current on the missed payments, including principal, interest, taxes, and insurance. You can usually do this by:

• paying the lender a lump sum
• paying a portion of the overdue amount along with your regular mortgage payment over time
• deferring repayment until the loan ends, or
• completing a modification in which the lender adds the amount you owe to the loan balance.

Sometimes, the servicer can extend the forbearance if your hardship isn't resolved by the end of the forbearance period. You won't be subject to foreclosure during a forbearance period.

FHA Special Forbearance for Unemployed Homeowners

If you have a loan insured by the Federal Housing Administration (FHA) and lose your job, you might be eligible for a "special forbearance" (SFB). This program is designed to give homeowners a chance to stay in their homes until they land a new job and resume making their regular mortgage payments. The program was due to expire in August 2013, but FHA extended it indefinitely.

An SFB could last one year, but there isn't a maximum term limit. Also, it might be followed by a payment schedule based on your ability to pay or another option that will cure the default.

Programs That Modify Your Loan to Reduce Your Monthly Payment

A "loan modification" is a long-term change to your current loan terms, like an interest-rate reduction, which then lowers the monthly payment to make the loan more affordable.

To get a modification, you'll have to be able to show that your household has a steady stream of income and you can make payments under a modified loan. This requirement might be hard to meet when you're unemployed. But if you have an employed spouse or other breadwinners living in the home, you might qualify.

Fannie Mae/Freddie Mac Flex Modification

If Fannie Mae or Freddie Mac owns your loan, you might qualify for the Flex Modification program, which can lower an eligible borrower's mortgage payment by around 20%. You'll have to show that your household has a steady income stream and can make payments under a modified loan.

Various other kinds of modifications are also available to borrowers with Fannie Mae or Freddie Mac loans.

Modifications for FHA-Insured and VA-Guaranteed Loans

Governmental entities, like the FHA and Veterans Administration (VA), offer special kinds of modifications for borrowers with FHA-insured and VA-guaranteed loans.

In-House Modifications

Many lenders have their own in-house ("proprietary") mortgage modification programs. Again, you'll have to show that your household has a steady stream of income and can make payments under a modified loan.

Assistance From a Homeowner Assistance Fund Program

If you lose your job because of COVID-19, you might be eligible to receive mortgage payment assistance from your state's Homeowner Assistance Fund program. On March 11, 2021, President Joe Biden signed the American Rescue Plan Act into law. Part of this law created a "Homeowner Assistance Fund" to provide $10 billion to the states to help struggling homeowners.

Programs vary from state to state but generally offer assistance with paying overdue mortgage payments and, in some cases, future mortgage payments and covering other housing-related costs, like property taxes and utilities. In some states, assistance is structured as a nonrecourse grant you don't have to repay. In others, the assistance is in the form of a loan, which is sometimes forgivable.

Most Homeowner Assistance Fund programs are scheduled to continue until 2025 or 2026 or when all allocated funds have run out. While many programs have used all their funding and stopped taking applications, particularly in states with high foreclosure rates, some Homeowner Assistance Fund programs remain open.

Other Government Programs Providing Mortgage Relief

Some states have programs to help borrowers who are having trouble paying their mortgages. For example, Pennsylvania offers the Homeowners' Emergency Mortgage Assistance Program. This program helps homeowners in Pennsylvania who, through no fault of their own, are financially unable to make their mortgage payments and in danger of losing their homes to foreclosure.

Check with your state's housing agency (sometime called a "housing authority") to find out if assistance is available where you live.

Getting Help

If you need additional information on any of the programs mentioned in this article or have general questions about how to get help with your mortgage, consider talking to a lawyer. You may also contact the U.S. Department of Housing and Urban Development (HUD) and arrange to speak with a housing counselor.

A lawyer or housing counselor can help you navigate your options, work with your loan servicer, and develop a plan to manage your mortgage payments while you're unemployed. Understanding your rights and taking advantage of all available resources can make a significant difference in whether you'll be able to keep your home.