Best Mortgage Relief Programs – Help if You're Struggling
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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.
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 look at what mortgage relief programs are available today.
Jump To
Overview of the best mortgage relief programs
Relief program | Best for |
COVID hardship forbearance | People who need to pause mortgage payments due to pandemic-related financial hardships temporarily |
Foreclosure moratoriums | People who are unable to make mortgage payments and would normally be at risk of foreclosure |
Flex modification | People who need to change the terms of their existing mortgage |
FHA (Federal Housing Administration) streamline refinance | Homeowners 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 |
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Mortgage relief programs explained
COVID hardship forbearance
This mortgage relief option was originally made available under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act.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.
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 any of these backs your mortgage, 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 face financial hardships and 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 Fannie Mae or Freddie Mac backs your mortgage.
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 Fannie Mae or Freddie Mac backs your mortgage 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 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 contact you at the end of your forbearance period to discuss your missed payments and available repayment options.
Foreclosure moratoriums
Foreclosure moratoriums are another mortgage relief option for those affected by the coronavirus pandemic. Like the COVID hardship forbearance, foreclosure, and eviction moratoriums were made available to eligible homeowners under the CARES Act. Your mortgage must be backed by government-sponsored enterprises Fannie Mae or Freddie Mac, HUD, FHA, USDA, or VA to qualify.
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 foreclosure 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 contact your mortgage lender or servicer to discuss your options to inquire about its mortgage relief programs if you're facing financial hardship.
Flex modification
The flex loan modification program allows eligible homeowners to change the original terms of the mortgage to make it more affordable. The plan aims 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 owned or guaranteed by Fannie Mae or Freddie Mac. Unlike other mortgage relief programs, the flex modification program is unavailable for government-backed mortgages such as FHA or VA loans. Your mortgage must be first-lien and must be at least one year old to qualify for the program.
It’s important to understand that this program is only available if your mortgage lender believes you can no longer afford your monthly payment. Usually, your mortgage should be past due by 60 or more days. You may also qualify if the lender determines you face 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 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, you can complete and submit paperwork, including proof of financial hardship and income. You can contact your lender for mortgage assistance or see if a streamlined version of the program is available to you.
FHA Streamline Refinance
If you have an existing FHA loan, you can 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 much time and energy on paperwork.
Although the program requires less documentation and underwriting than other refinancing options, there are requirements to be aware of. To start, the mortgage 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 getting the property reappraised can be a good idea if the property's value has increased since you purchased it. However, if you do not use the property 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 cannot exceed the original amount borrowed to purchase a home.
The specifics of your streamlined will depend on what the lender you choose offers. For example, you may 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 program is similar to the FHA streamline refinance and can also be referred to as a VA streamline refinance. This program is only available to borrowers with a VA-backed home loan.
In addition to having a VA-backed mortgage, you must meet a few other requirements to qualify for this program. You must be able to certify that you live in or used to live in the home that the new loan will cover. “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, lowering your monthly mortgage payments. It could also allow you to get a fixed interest rate, which can be attractive if your current mortgage has a variable interest rate.
To get an IRRRL, you must go through a lender like a private bank, credit union, or mortgage company. Each lender will have terms and fees, so comparing your options is important. 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 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 or older. You will also have to occupy the property you want to take out a reverse mortgage as your primary residence. Some qualified individuals get a reverse mortgage after owning the property outright, but you can also qualify if you have paid a considerable amount. You will not qualify for the program if you are delinquent on 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 property value, 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 loan's lifetime, 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 program | Qualifying mortgages | What it does |
COVID hardship forbearance | Mortgages backed by Fannie Mae, Freddie Mac, HUD, FHA, USDA, or VA | Temporarily pauses mortgage payments if the borrower is facing financial hardship due to the coronavirus pandemic |
Foreclosure moratoriums | Mortgages backed by Fannie Mae, Freddie Mac, HUD, FHA, USDA, or VA | Temporarily prohibits foreclosures |
Flex Modification | Mortgages backed or guaranteed by Fannie Mae or Freddie Mac | Allows borrowers to reduce their monthly payments by changing the existing terms of their mortgage |
FHA (Federal Housing Administration) Streamline Refinance | Mortgages guaranteed by FHA | Allows 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 VA | Allows 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 standards | Allows 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 struggle to make your mortgage payments, you should contact 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 must keep track of the program to ensure you understand and adhere to changing terms and requirements. If you’re unsure if the program will benefit you or are concerned about the terms possibly changing in the future, you may want to consider whether the program is worthwhile for you.
Unfortunately, there are also mortgage relief scams, so you should also be sure you know exactly who you’re dealing with before providing any personal information or payments.
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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 considering whether you qualify for a program if you struggle 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 can benefit from.
If you 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. 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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Ashley Hart is a lead copywriter and digital marketing expert covering finance, law, real estate, music, entertainment, health and wellness.
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