Question

I was recently laid off from my job and can no longer afford to pay the high monthly payments on my home. Can I get help with my mortgage?

Answer

Yes, possibly. Depending on your circumstances and where you live, you might be able to get help through a federal, state, or lender program that:

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

Get Temporary Financial Assistance From a Hardest Hit Fund Program

If you lose your job though no fault of your own, you might be eligible to receive mortgage payment assistance from a Hardest Hit Fund program in your state.

Background. The U.S. Department of the Treasury created the Hardest Hit Fund (HHF) to provide $7.6 billion in aid to the states that experienced the most extreme home price declines and high unemployment rates as a result of the economic crisis. These states then used the funds to establish programs designed to distribute money to distressed homeowners so they can prevent their mortgage from going into default or foreclosure. (To find out more about the Hardest Hit Fund and related programs, see Save Your Home From Foreclosure: Hardest Hit Fund Programs.)

States with Hardest Hit Fund programs. The following states have established HHF programs: Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee, and Washington, D.C.

Most state HHF programs are geared toward helping unemployed homeowners. The various programs typically provide funds to:

• bring an unemployed homeowner’s loan current, and
• cover future mortgage payments.

This allows you to remain in your home while you search for new employment.

Funds are still available. The HHF got rolling in February 2010, but many of these programs still have funds available for homeowners who need help with mortgage payments. Also, some state programs and closed, but then reopened when more funds became available. The states have until the end of 2020 to utilize the funds allocated under the HHF.

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.

Forbearance Agreements in General

With a forbearance agreement, your mortgage servicer agrees to reduce or suspend your monthly mortgage payments for a set period of time. At the end of the forbearance period, 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 a period of time, 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 is not resolved by the end of the forbearance period. You will not be subject to foreclosure during a forbearance period.

FHA Special Forbearance for Unemployed Homeowners

If you have an FHA-insured loan and you 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. This program was due to expire in August 2013, but FHA extended it indefinitely.

A SFB may last one year, but there isn't a maximum term limit. Also, it may be followed by a payment schedule based on the homeowner’s ability to pay or another option that will cure the default.

Programs That Modify Your Loan to Reduce Your Monthly Payment

A mortgage modification is a long-term change to existing loan terms, such as a reduction of the interest rate, which then lowers the monthly payment to make the loan more affordable. (Read about how to get a loan modification.)

Fannie Mae/Freddie Mac Flex Modification

If Fannie Mae or Freddie Mac (government-supported enterprises that own or guarantee many mortgages in the U.S.) own 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 stream of income and can make payments under a modified loan. (Learn more about Fannie and Freddie Flex Modifications.)

In-House Modifications

Many mortgage servicers have their own in-house 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.

How to Get Additional Information

If you need additional information on any of the programs mentioned in this article or have general questions about how to obtain help with your mortgage, contact the U.S. Department of Housing and Urban Development (HUD)'s Housing Counseling Program and arrange to speak with a housing counselor.