Can’t Pay Your Mortgage? Options for Homeowners Who Are Struggling to Make Ends Meet

by Ryan Guina

In an earlier post we addressed the moral obligations of making your mortgage payments and not walking away from a home when you can afford the monthly payments. But there are also people out there who really can’t afford their payments.

There are many homeowners out there who want to stay in their homes, can’t afford the mortgage, and don’t know where to turn. While there’s no guarantee of a mortgage modification, there are options out there that many struggling homeowners aren’t aware of. The following tips may help you find a way to modify your current mortgage, refinance to a lower interest rate, or otherwise obtain assistance.

Housing Counseling

Homeowners who can’t make their mortgage payment have options. The first person they should seek out is a housing counselor. The U.S. Department of Housing and Urban Development has a list of certified housing counselors in every state. These counselors are trained to help homeowners assess their financial situation and explore every option available to help them stay in their home, including working directly with your lender. Plus, the counseling is free.

Government Programs Are Available

There are federal programs to help some homeowners.

Making Home Affordable Program

The most known program is the Making Home Affordable Program, which aims to assist homeowners through refinancing or a mortgage modification. One important benefit of the Making Home Affordable Program is that borrowers do not have to be delinquent on their mortgage to get help. In fact, to get a refinance the borrower cannot be delinquent.

Loans held by Fannie Mae or Freddie Mac may be eligible for refinancing. Other loan servicers may also participate in this program. A list of participating loan servicers can be found on the program’s web site.

If refinancing isn’t an option, there is also the option of a mortgage modification under the Making Home Affordable Program. The modification options may include the lender lowering the borrower’s interest rate, extending the term of the loan to up to 40 years or deferring the principal of loan.

It is important to note that accepting a mortgage modification could have a negative impact on your FICO credit score and you could end up with a balloon payment due at some point.

In addition to the federal program, some states have programs available to help homeowners who are facing foreclosure. Housing counselors in your state should be aware of these programs.

Home Affordable Refinance Program (HARP)

Many lenders aren’t willing to refinance a mortgage when the homeowner owes more than the home is worth. But the updated Home Affordable Refinance Program (HARP) changed this for some homeowners, helping them avoid high interest rates and possible foreclosure.

Home Affordable Refinance Program (HARP)

Are you eligible for the updated Home Affordable Refinance Program?

What changed in the new Home Affordable Refinance Program? The HARP program began in March 2009, and has gone through several modifications. The current version is expected to end at the conclusion of the 2016 calendar year.

Perhaps the biggest change was eliminating the cap on the loan-to-value ratio. The old rules prevented homeowners from refinancing if they owed more than 125% of their home’s value. This limit is now removed. The new rules also eliminate the need for a new home appraisal in most circumstances.

Real estate investors or second home owners may also qualify under the new rules. Eligible properties include single-family homes, condos, co-ops, second homes, or investment properties with up to four units.

Who qualifies for HARP:

  • Your mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae, and must have been sold to them on or before May 31, 2009.
  • You can only use HARP once, so if you have already used it, you will be ineligible to use it again (there may be some exceptions if you have a Fannie Mae loan which was refinanced under HARP from March-May, 2009).
  • The mortgage loan-to-value (LTV) ratio must exceed 80% (LTV ratios of less than 80% should be eligible for a traditional refinance).
  • Must be fixed rate loan (adjustable rate loans or sub-prime loans do not qualify).
  • Loans must be up to date. You cannot have any late payments in the previous six months, and no more than one late payment in the previous 12 months.

Find out if your home loan is held by Fannie Mae or Freddie Mac: If you believe you qualify for the Home Affordable Refinance Program, then you should verify which lender owns your mortgage. You can use the following online tools to help determine if Fannie Mae or Freddie Mac owns or guarantees your home mortgage:

What if your mortgage is held by a private lender? Many of the largest banks have a greed to participate in loan modifications, but lender participation is voluntary, and they have the ability to change the details of the loan program. Basically, this means the major banks can use these terms as guidelines, but don’t have to follow them to the letter. This makes it even more important to verify the details of your mortgage, and not rely 100% on what you read on the news. Always verify loan details before signing on the dotted line.

Shop for lower mortgage rates. If you believe you are eligible for the updated Home Affordable Refinance Program, you should contact your lender and ask them how they can help you refinance your mortgage. It also helps to shop around and compare mortgage rates so you have a good idea of what your options are.

Work Directly With Your Lender

Just because your loan isn’t held by a service provider that is working with the federal program, that doesn’t mean you don’t have options. You can call your lender’s loss mitigation department on your own; however, working with your lender through their loss mitigation department can be a difficult and frustrating experience. Housing counselors have experience dealing with lenders and navigating the process to get a mortgage modification.

Some mortgage modification options are similar to the federal program options such as stretching the length of the loan or allowing for a deferment of the principal of the loan. In very limited cases, the lender may be willing to forgive a portion of the loan. However, this isn’t very likely, especially if there isn’t a case of extreme hardship.

Get Help Now

Mortgage modifications are very complicated. There are many variables that factor into whether or not a borrower can get a modification based on each individual’s situation. The biggest thing I can stress – besides getting help from a HUD-certified housing counselor – is to get help as soon as you realize you may not be able to make your mortgage payment. Don’t wait until you’re behind on your payments to get assistance. And, if you are already behind and haven’t talking to a housing counselor, do so immediately. Working with a professional is the best way to ensure that you’ve explored every option to help you stay in your home.

Links to Resources:

This article was written in tandem by Ryan Guina and Kristen Doerschner. Kristen Doerschner is the public relations coordinator for a non-profit debt relief agency and a freelance writer. Through her writing, Kristen covers a variety of topics, but specializes in issues related to financial education.

Published or updated August 30, 2016.
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{ 5 comments… read them below or add one }

1 Daddy Paul

Many lenders are happy right now to cut a deal as oppose to the problems they will have if they don’t cut a deal. The lenders sure do not want to take the house and they do not want bad publicity.


2 RJ Weiss

Agreed with Daddy Paul. Stay in contact with your lender. Let them know that you want to keep the house. Work out a deal if you can.

Don’t forget that they will probably loose a lot more money if the house goes into foreclosure, then the individual stands to loose.


3 WR

If a person can’t afford the mortgage of a house, they should not be in that house. This is not a political, moral or value judgment. It’s a financial one.

A person’s lodging should be a fraction of their expenses. By dramatically ‘saving’ their home, even by marginally lowering their mortgage expense, hurts a lot of people who should not own *that* home.

Mortgage Modification could bring down the DTI to 31%. That is still too much for lots of people. Take advantage of any program you can but you gotta get into a home you can “really” afford which should be quite a bit less than 31 percent of your gross income.

Not trying to be provocative or insensitive, just my opinion.



4 Fred @ One Project Closer

We examined the MHA program when we were trying to refinance to a 15 year loan and our house value dropped below 80% LTV. We had locked into a 4.25% loan.

Once we realized we didn’t have the 80% LTV, we checked and discovered our loan was held by freddy. Unfortunately, the rate was higher under MHA – by about 50 basis points. Our mortgage lender said this is pretty typical. Made the refinance no longer make sense for us. So we stuck with our 30 year and have decided just to overpay.

I’m not sure what the reality will be for others, but I would have hoped that a refi under the MHA program would have made you eligible for the best rates available. Apparently not.


5 Paul E. Tooley Sr

I was mortgaged under Bridgestone, they went belly up sold out to Countrywide, who treated me disingenuously; Bank of America took them over and never explored the disingenuousness they treated me with. I kept up my payments, and BAC allowed me a place on their Making Home Affordable, and I was approved to drop my payments a few dollars, but they are having so much to go through, and I am faint from the procedures. I want to know whether I should walk away. I am 79, my Mtg payment is prolonged until 2035 with a “balloon” payment of nearly $7,000.00 for the final payment. My regular payment monthly is nearly half my income. BAC has 15,000 employees and has that to their credit (giving employment to them. But I’m hostage to their outrageous policies and protocols.


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