What do you need to know about mortgage relief programs? The first and most important step you’ll need to take when researching your options in this area is to determine the nature of your mortgage, who is your current loan servicer, and whether or not you are delinquent on the loan. The more payments you miss, the more limited your mortgage relief options may be, so it’s crucial to act as early as possible.
In all cases, the cooperation of your lender is required. Get in touch with your loan servicer as soon as you know you may have trouble making your payments for best results.
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What Kind Of Mortgage Relief Do You Need?
Mortgage relief programs vary greatly, they are often specific to a certain type of loan such as those backed by the FHA, VA, or USDA. They may also include Fannie Mae or Freddie Mac loans. What kind of home loan do you have?
- Fannie Mae and Freddie Mac conventional loans
- Federal Housing Administration-guaranteed FHA loans
- Department of Veterans Affairs-guaranteed VA loans
- Department of Agriculture-guaranteed USDA loans
You can verify what kind of mortgage loan you have by referring to your loan paperwork for the Closing Disclosure which has loan information that identifies your transaction as a VA mortgage, FHA home loan, USDA mortgage, conventional mortgage, etc. You can also call your loan servicer to get this information.
Some may not know who the loan servicer is. Review your mortgage documents and call the lender named in them–if the loan has been sold to a different servicer you should be able to get the information from the original lender.
Don’t Waste Your Time Searching For Outdated Programs
Some home owners may have heard about a set of mortgage relief programs offered to homeowners in the wake of the housing crisis of 2008; many such programs have since terminated or expired including:
- Home Affordable Refinance Program (HARP, also known as the Obama Mortgage) expired in 2018
- Home Affordable Modification Program (HAMP) expired in 2016
Some sources report that the Freddie Mac Enhanced Relief Refinance (FMERR) expired in 2019, but at press time, the Freddie Mac official site still references and links to this program as an ongoing concern with no expiration date listed.
Mortgage Loan Relief For Conventional Mortgages
Conventional mortgages backed by Fannie Mae and Freddie Mac are mortgages that are guaranteed by a Government Sponsored Enterprise or GSE for short. Fannie and Freddie loans are considered GSE backed.
For these conventional loans, federal law under the CARES Act offered foreclosure avoidance protection until Dec. 31, 2020. CARES Act protections also included the ability to apply for loan forbearance for up to 180 days initially with the option to request another loan forbearance period of 180 days. A deadline of Dec. 31, 2020 was established for some transactions–this is another mortgage relief option that was offered on a temporary basis.
But GSEs such as Fannie and Freddie have more permanent relief options. Freddie Mac and Fannie Mae loans offer the following relief options to help borrowers stay in their homes:
- Refinance–an option for those current on their mortgages who need a new loan with more affordable terms. Fannie and Freddie loans have different options. For example, Freddie Mac loans have an Enhanced Relief Refinance for those who are underwater on their homes and owe more than the property is worth. Fannie Mae offers a program called HIRO–the High LTV Refinance Loan Option. These loans may not be offered at all times and may require your mortgage to have originated on or after a specified date for that particular program.
- Home Loan Forbearance–an option to suspend or lower mortgage payments for a fixed rate of time to help borrowers weather a period of financial hardship. Apply for this as soon as possible–the smaller number of payments missed will make it easier to set up this program with your lender.
- Mortgage Reinstatement–an option for those who are trying to cure a delinquent mortgage by paying the entire amount of any missed payments, taxes, interest, and insurance you have experienced to date. This option is good for those who are no longer experiencing a financial hardship and can make a lump sum payment.
- Home Loan Repayment Plan–an option where you and the lender agree to a new schedule of payments over a fixed period of time such as one year where a segment of the overdue amount is added to the mortgage payment to pay off the missed payments over time.
- Fannie Mae and Freddie Mac Mortgage Payment Deferrals–a plan where you can delay a fixed number of payments to the end of your mortgage without a penalty. Those who no longer have financial trouble but can’t afford to make a lump sum payment to catch up may find this plan helpful.
- Loan modification–an option where you work with the lender to modify your mortgage to make it more affordable. The lender may agree to reduce a portion of your loan to facilitate this. The sooner you act in such cases, the better.
Conventional mortgage borrowers who have loans that are not Fannie/Freddie GSE mortgages must contact their conventional loan servicer to ask what relief options are open to them. These options are not standardized and may depend greatly on the willingness of your loan servicer to work with you and your circumstances.
Mortgage Relief Programs For Government Backed Loans: VA, FHA, USDA
All the general options mentioned for conventional loans listed above (refinance, modification, loan forbearance, repayment plans, etc.) are generally offered to those who have FHA, VA, or USDA mortgages. Government-backed loans generally require the lender to exhaust many options before resorting to a foreclosure. However, the borrower must contact the lender to work out these options, they are NOT automatic.
All lenders should consider some form of relief to a borrower in financial trouble working hard to save their home. In times of natural disaster, national emergency, etc. FHA mortgages, VA home loans, and USDA loans may have automatic procedures for borrowers who meet certain criteria such as having a home damaged by a natural disaster in a federally-declared disaster area; an automatic foreclosure moratorium may be placed in effect for FHA loans, VA mortgages, USDA loans, etc.
However, borrower-lender cooperation is expected and required as early as possible to avoid complications and more costly remedies to cure the mortgage.
And then there is the option a borrower should also consider to solve problems requiring mortgage relief.
Streamline Refinancing
USDA, FHA, and VA mortgages all offer some form of streamline refinancing which generally must result in a “net tangible benefit” to the borrower in the form of something like a lower monthly payment, a lower interest rate, getting out of an adjustable rate mortgage into a fixed-rate loan, etc. In many cases there is no government required appraisal or credit check for these loans unless add-ons to the mortgage make the payments go up by a certain percentage (which may vary depending on the program).
Streamline refinance loans permit no cash back to the borrower the way a cash-out refinance operates, but the benefits of such refinancing are great for those who need a more affordable and/or predictable mortgage. Streamline loans are offered for existing FHA, VA, USDA mortgages.
These refinance loans are for existing loans of their type. You cannot refinance a conventional mortgage into a VA loan, for example, using Streamline Refinancing. You can refinance an existing FHA mortgage into an FHA refinance, but you cannot use a Streamline Refinance to refinance a VA mortgage to an FHA loan. VA-to-VA refinances yes, VA-to-FHA or VA-to-conventional or VA-to-USDA, no.
Streamline Refinancing is sometimes referred to as Interest Rate Reduction Refinancing or IRRRL for short. Many VA lenders use the term VA IRRRL when referring to a streamline loan, and some FHA lenders do too. The IRRRL is the same exact thing as a Streamline Refinance loan.
VA borrowers have the added advantage of the following options offered to borrowers who may need assistance before or during a situation where they may need VA mortgage relief:
- Veterans and surviving spouses of veterans are eligible for VA-provided financial counseling even in cases where the loan isn’t a VA mortgage. If you qualify for the VA loan program, you qualify for financial counseling
- VA borrowers with a VA backed mortgage or a VA direct loan can call the VA at 1-800 827-1000 to request a VA loan technician be assigned to your case for help dealing with a participating lender, financial counseling, and other needs
- VA borrowers who are more than 60 days past due on a mortgage payment automatically have a VA loan technician assigned to help with the above
In all cases, for any mortgage relief program for VA, USDA, FHA, or conventional mortgages, you will be required to contact your lender and make arrangements. No relief is automatic and the participation of your lender is required for all modifications or changes to your mortgage.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News
