Homeowners Facing Financial Distress: Mortgage Relief Options

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Countless homeowners are one crisis away from financial hardship. With unemployment rates rising, many families are now concerned about paying their mortgages and are exploring their available options.

CARES Act Assistance for FHA, VA, and USDA Borrowers

The CARES Act provides support to homeowners with Federal Housing Administration (FHA), U.S. Department of Veteran’s Affairs (VA), or Rural Housing Service (RHS) loans who are affected by the COVID-19 pandemic. This assistance comes in the form of mortgage forbearance, which is a temporary suspension or reduction of mortgage payments. However, note that forbearance is not the same as payment forgiveness.

Homeowners can request up to 180 days of forbearance and potentially extend this by a further 180 days. No documentation is needed to access this support. Continuing to make scheduled payments is recommended if possible. More information on the CARES Act forbearance option can be found on HUD's fact sheet.

Federal Government Programs

  • Freddie Mac and Fannie Mae Programs

  • Freddie Mac and Fannie Mae offer mortgage relief options through various programs. Homeowners can access support via the dedicated Borrower Help Center and Network webpage.

  • Streamlined Modification Initiative

  • The Federal Housing Finance Agency (FHFA) also offers assistance with lowering interest rates or extending repayment terms. More details can be found on the FHFA website.

  • Energy Efficient Mortgages

  • The federal government supports several programs for energy conservation. More information about energy-efficient mortgages can be found on the HUD webpage.

  • Making Home Affordable

  • This program partners the federal government with banks and other lenders to offer loan modifications, fee reductions, and other support to homeowners. To learn more, visit the Making Home Affordable website.

  • High LTV Refinance Option

  • Fannie Mae's high LTV refinance option allows homeowners with negative equity to refinance more affordably.

  • Home Affordable Foreclosure Alternatives (HAFA)

  • HAFA offers support through short sales and deeds of lieu, providing financial incentives for lenders and borrowers.

  • Hardest Hit Fund

  • This scheme provides payment assistance, loan modification, and transition support for homeowners in 18 states and the District of Columbia. More information can be found on the Making Home Affordable webpage.

Exploring Additional Mortgage Relief Options

Remember that for lenders, it is usually in their best interest to avoid foreclosure. Some possible alternatives include:

  • Short Sales: a complicated process that results in the loss of the home but prevents foreclosure.

  • Short Refinancing: the lender refinances the mortgage for a smaller amount than the balance, making monthly payments more affordable.

  • Loan Modifications: available for homeowners facing financial hardship or changes in circumstances that prevent them from making mortgage payments.

  • Mortgage Principal Reduction Programs: lenders write off large sums of mortgage principals to avoid foreclosure.

  • Deed in Lieu of Foreclosure: the homeowner signs the deed to their home over to the bank, preventing a significant impact on their credit score while freeing themselves from debt.

Remember to consider the potential impact on credit scores for some of these options and weigh the pros and cons of each approach.

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Carol Bianchi

Carol Bianchi is a staff writer for Affordable Housing Hub. Her role includes sourcing up to date information and news on affordable housing programs within the U.S. and bringing that information to the readers of Affordable Housing Hub.