Depending on your particular situation, if you lose your job through no fault of your own, you might be able to get help with your mortgage payments from the government, your mortgage servicer (working on behalf of the lender), or both. Some programs provide money to help you pay your monthly mortgage payments, while others let you stop making payments altogether for a set period of time, or modify your loan agreement to lower your monthly payments permanently.
If you lose your job through no fault of your own—and you live in one of the participating states—you might be able to get money to make your mortgage payments through your state’s Hardest Hit Fund program.
History of the Hardest Hit Fund. In response to the financial crisis of 2008, the U.S. Department of Treasury started the Hardest Hit Fund (HHF) to provide billions of dollars in aid to the states that were hit hardest by the economic downturn, hence the name. The states that Treasury included in the program experienced steep declines in home prices, as well as job losses at a level the country hadn’t seen since the Great Depression. To prevent mortgages from going into default or foreclosure, the participating states use federal HHF money to aid struggling homeowners.
States with HHF programs. The states that have HHF programs are 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.
How the programs work. While each state’s HHF program is unique, they're generally designed to help unemployed and underemployed homeowners stay in their homes while they look for a new job. A HHF program might help you bring your loan current (called “reinstating” the loan), provide money for future payments, help you reduce your outstanding principal amount, or help you transition into a more affordable home. Each state’s program is run by their housing finance agency (HFA), so you should check with your state’s HFA to find out if you qualify for help. To find links to the states’ HHF programs, go to U.S. Department of the Treasury’s Hardest Hit Fund webpage.
If you have a temporary hardship, like losing your job, your mortgage servicer (the company that handles your loan account on behalf of the lender) might offer you a forbearance agreement which reduces or suspends your monthly payments for a set period.
Each forbearance agreement is unique to the borrower and the servicer. The length and structure of your forbearance agreement is based on your particular situation, and your servicer might be willing to extend the forbearance period if your hardship continues. However, with any forbearance, you will eventually have to pay back any missed payments, get current on your loan, and return to making your full payments.
To get current on the loan, you’ll have to pay the overdue principal, interest, taxes, and insurance, all of which continue to add up during the forbearance period. You can normally make your loan current with a lump sum or by making partial payments in addition to your normal monthly payments. (In some cases, you might qualify for a loan modification—see below).
As you might imagine, getting current after a financial hardship can be difficult, so you should be careful to weigh all of your options before entering into a forbearance agreement.
If you’re unemployed—and the Federal Housing Administration (FHA) insures your loan—you might qualify for a Special Forbearance. This type of agreement is also tailored for each borrower, but it offers relief that typical forbearances do not. A Special Forbearance may last one year, but there is no maximum term limit. The Special Forbearance may also be followed by a payment schedule based on the homeowner’s ability to pay or another option that will cure the default, rather than reverting to the original payments.
A Special Forbearance period can be significantly longer than the typical in-house forbearance period, and the additional possibility of the post-forbearance payment plan means that you’ll likely have a good chance of landing on your feet.
If getting temporary assistance with your payments is not enough to solve your mortgage payment problems, a loan modification might be your best bet because it permanently changes the terms of your loan. A modification can lower your interest rate, convert a variable interest rate to a fixed rate, and extend the loan term so that your monthly payments will be affordable.
Getting a loan modification can be a difficult process because you’ll have to give your servicer a great deal of documentation about your financial situation and, if you don’t timely submit your documents, they'll probably expire and you’ll have to start the whole process from the beginning.
If your servicer evaluates your finances and agrees to modify your loan, you’ll typically have to complete a three-month trial period to demonstrate that you can afford the new payments before you can get a permanent modification. Keep in mind that to get a modification, you’ll have to show that your household has a steady stream of income and can make payments under a modified loan.
Most modifications are in-house, meaning that each lender or servicer uses its own criteria when deciding whether to modify the loan. Some lenders and servicers are more borrower-friendly than others.
Many mortgages, though, are either owned or backed (guaranteed) by Fannie Mae or Freddie Mac, which are government-sponsored enterprises. Mortgages these entities own can qualify for Flex Modifications, which are standardized and more streamlined and transparent than most in-house modifications. Flex Modifications are meant to fill the vacuum left by the Home Affordable Modification Program (HAMP), which expired at the end of 2016.
A flex modification can reduce your monthly payments up to 20%, extend the loan term to 40 years, and might even include a principal forbearance. (A “principal forbearance” is a portion of the unpaid balance that’s set aside, doesn’t accrue interest, and is due in a balloon payment when the loan term ends.) Also, the application process can be more straightforward and easier for borrowers.
For more information on the programs mentioned in this article or for general questions about how to get help with your mortgage or foreclosure, consider talking to a foreclosure attorney. If you can’t afford an attorney, you can arrange a free consultation with a HUD-approved housing counselor by contacting the U.S. Department of Housing and Urban Development (HUD)'s Housing Counseling Program.
