The Best Mortgage Relief Programs – Help if You're Struggling

Falling behind on your mortgage payments? Struggling to make ends meet? There’s no shame in that. In fact, nearly 3 million people filed for relief due to Covid in 2020. And it's not the only relief available.
Actually, there are a few types of mortgage relief programs, and while you might not qualify for all of them, there’s a good chance that at least one can help you. So, take a deep breath, don't panic, and take a look at what mortgage relief programs are available to you today.

Overview of the best mortgage relief programs

Relief programBest for
COVID hardship forbearancePeople who need to temporarily pause mortgage payments due to pandemic-related financial hardships
Foreclosure moratoriumsPeople who are unable to make mortgage payments and would normally be at risk of foreclosure
Flex modificationPeople who need to change the terms of their existing mortgage
FHA (Federal Housing Administration) streamline refinanceHomeowners with an FHA mortgage that want to lower their interest rate quickly
VA interest rate reduction refinance loan (IRRRL)Homeowners with a VA mortgage that want to lower or change their interest rate
Home equity conversion mortgages (HECM)Seniors who have equity in their home and want a supplemental income source

Mortgage relief programs explained

COVID hardship forbearance

This mortgage relief option was originally made available under the Coronavirus Aid, Relief, and Economic Security Act, otherwise known as the CARES Act. It allows eligible homeowners to put their mortgage in forbearance. When a mortgage is in forbearance, the mortgage lender or servicer suspends or reduces your mortgage payments temporarily. Mortgage forbearance programs do not erase all or part of what you owe, but the payment deferral can reduce your financial strain temporarily.
warning:  Forbearance does not erase all or part of what you own. It defers it so you can reduce your financial strain. You will have to pay back payments on what you missed.
To qualify for this mortgage relief program, your mortgage must be backed by Fannie Mae, Freddie Mac, or the federal government. This includes mortgages backed by the Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA), Department of Agriculture (USDA), or Veterans Affairs (VA). If your mortgage is backed by any of these, you may be eligible for an initial COVID hardship forbearance of up to 180 days.
If you’re interested in using this mortgage relief program, you must submit a request for forbearance by contacting your loan servicer. You should submit the request as soon as you are facing financial hardships, and you must submit a claim to have a pandemic-related financial hardship to qualify. If your mortgage is backed by HUD, FHA, USDA, or VA, you must submit your initial forbearance request by June 30, 2021. There is no deadline for an initial forbearance request if your mortgage is backed by Fannie Mae or Freddie Mac.
There is also the option to request an extension of your forbearance if you need more time. You may be entitled to a 180-day extension of the COVID hardship forbearance. If your mortgage is backed by Fannie Mae or Freddie Mac and you received your initial forbearance before March 1, 2021, you may also be able to request up to two additional 3-month extensions. Mortgages backed by HUD, FHA, USDA, and VA are also eligible for additional 3-month extensions, but only if you started a forbearance plan before July 1, 2020.
After your forbearance period is over, your mortgage servicer cannot require you to repay the skipped payments from your forbearance in a lump sum payment. Your mortgage servicer will reach out to you at the end of your forbearance period to discuss your missed payments and the repayment options that are available to you.

Foreclosure moratoriums

Foreclosure moratoriums are another mortgage relief option for those affected by the coronavirus pandemic. Like the COVID hardship forbearance, foreclosure, and evictions moratoriums were made available to eligible homeowners under the CARES Act. To qualify, your mortgage must be backed by government-sponsored enterprises Fannie Mae or Freddie Mac, HUD, FHA, USDA, or VA.
Foreclosures are when a mortgage lender reclaims a property because the homeowner fails to make their required mortgage payments. According to federal law, loan servicers usually cannot start the foreclosure process until the loan is more than 120 days past due. Foreclosure moratoriums extend that period by suspending or stopping the foreclosure process altogether.
This program began on March 18, 2020, and prohibits mortgage lenders and servicers from beginning foreclosure against you. It also prohibits finalizing a foreclosure judgment or sale. If you qualify for a foreclosure moratorium under the CARES Act, your mortgage lender or servicer cannot foreclose on you until after June 30, 2021.
The foreclosure moratorium only applies to single-family residential mortgages and will take effect automatically for qualified homeowners. Even so, you may want to reach out to your mortgage lender or servicer to discuss your options if you’re facing financial hardship to inquire about its mortgage relief programs.

Flex modification

The flex loan modification program allows eligible homeowners to change the original terms of the mortgage to make it more affordable. The goal of the plan is to keep homes out of foreclosure by reducing monthly mortgage payments by 20% for eligible borrowers. This is a win-win solution for both lenders and borrowers because it is less expensive than foreclosure for lenders, and allows borrowers to stay in their homes.
To qualify for the flex modification program, your mortgage must be either owned or guaranteed by Fannie Mae or Freddie Mac. Unlike some other mortgage relief programs, the flex modification program is not available for government-backed mortgages such as FHA or VA loans. Your mortgage must be a first-lien mortgage and it must be at least 1 year old to qualify for the program.
It’s important to understand that this program is only available if your mortgage lender believes that you’re no longer able to afford your monthly payment. In most cases, your mortgage should be past due by 60 or more days. You may also qualify if the lender determines that you are facing imminent default. Typically, you could be considered facing imminent default if you are experiencing hardship such as reduced income. You can be in imminent default even if you are current or less than 30 days past due on your mortgage payments.
If you’re interested in looking into the flex modification program, the first step is to ask your lender if your mortgage is owned or guaranteed by either Fannie Mae or Freddie Mac. If it is, then you can complete and submit paperwork including proof of financial hardship and proof of income. You can reach out to your lender for mortgage assistance or to see if a streamlined version of the program is available to you.

FHA Streamline Refinance

If you have an existing FHA loan, you may be able to refinance it using the FHA Streamline Refinance program to receive a lower rate. This program offers a quick way for eligible borrowers to refinance their mortgages without spending a lot of time and energy on paperwork.
Although the program does require less documentation and underwriting than some other refinancing options, there are requirements to be aware of. To start, the mortgage that you want to refinance must already be insured by the FHA. You must also be current on your FHA mortgage payments to qualify. This refinancing program may not require an appraisal of your home, but it can be a good idea to get the property reappraised if the value of the property has increased since you purchased it. However, if you do not use the property that you plan to refinance as your primary residence, you can only refinance it without an appraisal.
One of the unique things about this refinancing option is that the FHA requires that an FHA Streamline Refinance benefits the borrower. However, there are limits to how it can benefit you. For example, since it is not a cash-out refinancing program, you won’t be able to get any more than $500 in cash from the new loan. A new loan under the FHA Streamline Refinance program also cannot exceed the original amount that was borrowed to purchase a home.
The specifics of your streamline refinance will depend on what the lender you choose offers. For example, you may be able to find an option that offers a higher interest rate instead of requiring you to pay out-of-pocket expenses. In this case, the closing costs would have to be paid by your lender because the FHA does not allow lenders to include closing costs in your total mortgage amount.

VA interest rate reduction refinance loan (IRRRL)

This is a similar program to the FHA streamline refinance, and can also be referred to as a VA streamline refinance. This program is only available to borrowers who have an already existing VA-backed home loan.
In addition to having a VA-backed mortgage, there are a few other requirements you must meet to qualify for this program. You must be able to certify that you either currently live in or used to live in the home that will be covered by the new loan. Additionally, “If you have a second mortgage on the home, the holder must agree to make your new VA-backed loan the first mortgage.”
If you qualify, the VA IRRRL may be a good option for many reasons. It could offer a lower interest rate, which would lower your monthly mortgage payments. It could also allow you to get a fixed interest rate, which can be an attractive option if your current mortgage has a variable interest rate.
To get an IRRRL, you’ll have to go through a lender such as a private bank, credit union, or mortgage company. Each lender will have its terms and fees, so it’s important to compare your options. Closing costs and other fees such as the VA funding fee can be included in your new loan. Alternatively, you may be able to accept a higher interest rate in exchange for your lender paying those costs.

Home equity conversion mortgages (HECM)

Home equity conversion mortgages (HECM) are a bit different than other mortgage relief programs and come with some very specific requirements. This program is the only reverse mortgage option that is insured by the U.S. federal government and is only available through FHA-approved lenders. If you qualify, you can use this reverse mortgage program to convert part of your home equity into cash without selling your home.
To qualify for a HECM, you must be 62 years of age or older. You will also have to occupy the property that you want to take out a reverse mortgage on as your primary residence. Some qualified individuals get a reverse mortgage after they own the property outright, but you can also qualify if you have paid down a considerable amount. You will not qualify for the program if you are delinquent on any federal debt. You must also have the “financial resources to continue to make timely payment of ongoing property charges such as property taxes, insurance, and Homeowner Association fees, etc.” Your personal financial information will be verified, including your income, assets, credit score, and payments of real estate taxes and insurance premiums.
Your property must also meet certain FHA property standards and flood requirements to qualify for this program.
The amount that can be borrowed depends on several factors, including the age of the youngest borrower, appraised value of the property, current interest rate, and the HECM FHA mortgage limit of $822,375. The loan will also include several fees and charges, including an origination fee, servicing fees, and third-party charges. At closing, you will be charged an initial mortgage insurance premium (MIP) of 2%. Over the lifetime of the loan, your annual MIP will be 0.5% of the outstanding mortgage balance.
To learn more about HECMs, you should seek out a HECM counselor. In fact, you are required to participate in an information session given by a HUD-approved HECM counselor to qualify for the program.

Mortgage relief programs summary

Relief progranQualifying mortgagesWhat it does
COVID hardship forbearanceMortgages backed by Fannie Mae, Freddie Mac, HUD, FHA, USDA, or VATemporarily pauses mortgage payments if the borrower is facing financial hardship due to the coronavirus pandemic
Foreclosure moratoriumsMortgages backed by Fannie Mae, Freddie Mac, HUD, FHA, USDA, or VATemporarily prohibits foreclosures
Flex ModificationMortgages backed or guaranteed by Fannie Mae or Freddie MacAllows borrowers to reduce their monthly payments by changing the existing terms of their mortgage
FHA (Federal Housing Administration) Streamline RefinanceMortgages guaranteed by FHAAllows borrowers with an already existing FHA mortgage to refinance quickly and lower their interest rate
VA interest rate reduction refinance loan (IRRRL)Mortgages guaranteed by the VAAllows borrowers with an existing VA mortgage to refinance and lower their interest rate or switch to a fixed interest rate
Home equity conversion mortgages (HECM)Any as long as your property meets FHA standardsAllows qualified borrowers to convert home equity into cash without selling the home

FAQs

Which mortgage assistance program is best for me?
To find out which mortgage program is right for you, you first need to find out who owns or services your mortgage. Once you know that information, you can narrow down the mortgage relief programs and find out which one(s) you are eligible for.
Can I be charged late fees during a forbearance period?
No, your loan servicer cannot charge you late fees or other penalty fees during your forbearance period.
What is mortgage delinquency?
If you’re delinquent, this means that you are behind on your monthly mortgage payments.
Who should I contact if I need help making mortgage payments?
According to the Federal Housing Finance Agency (FHFA), you should reach out to your mortgage servicer to see if you qualify for a mortgage relief program.

Why should you use a mortgage relief program?

Homeownership can be difficult for several reasons, and financial hardships can cause quite a blow for anyone. If you find yourself struggling to make your mortgage payments, you should reach out to your loan servicer as soon as possible. Your loan servicer can help you understand your options and may be able to guide you through deciding which option is best for you. Using a mortgage relief program can help you get back on your feet financially, stay in your home, and perhaps even reduce your monthly mortgage payments permanently.

When not to use a mortgage relief program

That being said, you do need to exercise caution when considering a mortgage relief program. If you qualify for one, you’ll want to make sure you understand all of the terms and conditions associated with the program. Programs can be extended or discontinued at any time, so you will need to keep track of the program to make sure you understand and adhere to changing terms and requirements. If you’re not sure if the program will benefit you or if you’re concerned about the terms possibly changing in the future, you may want to consider whether the program is worthwhile for you.
warning:  Beware of mortgage relief scams and be sure you understand the repayment terms before entering into an agreement.
Unfortunately, there are also mortgage relief scams out there, so you should also be sure you know exactly who you’re dealing with before providing any personal information or payments.

The bottom line

Financial hardships can feel hopeless, but fortunately, mortgage relief programs can lessen the burden for many homeowners. Although the requirements may seem tedious and confusing, it’s worth looking into whether you qualify for a program if you’re struggling to make your mortgage payments. While not everyone may qualify for a program, your loan servicer should be able to let you know if there are any that you may be able to benefit from.
If you happen to qualify, there’s no harm in considering a mortgage relief program. Before you pursue one, though, you need to make sure that you understand exactly what it requires from you in the future and how it will affect your finances in the long run. In some cases, a mortgage relief program can help you pay less over the lifetime of your loan, even if it doesn’t offer as much relief as other programs upfront. At the end of the day, you’ll need to work with your loan servicer to determine what will be best for your finances now and in the future.

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