Mortgage Financial Assistance Programs: A Guide to Homeowner Support Options

What Federal Mortgage Assistance Covers

Homeowners facing financial hardship have access to several federal mortgage assistance pathways. These programs aim to prevent foreclosure, cure delinquency, and maintain housing stability. The core options fall into three categories: the Homeowner Assistance Fund (HAF), loss mitigation workouts offered by mortgage servicers under federal guidelines, and free housing counseling through HUD-approved agencies.

The Homeowner Assistance Fund (HAF)

The Homeowner Assistance Fund was established under Section 3206 of the American Rescue Plan Act of 2021, which President Biden signed into law on March 11, 2021. Congress appropriated $9.961 billion to the U.S. Department of the Treasury to distribute to states, the District of Columbia, U.S. territories, tribes or tribal entities, and the Department of Hawaiian Home Lands.

HAF funds can be used for:

• Delinquent mortgage payments, including principal, interest, taxes, and insurance
• Mortgage reinstatement or other housing-related costs tied to a loss mitigation plan
• Principal reduction
• Homeowner's insurance, flood insurance, and mortgage insurance
• Homeowners association, condominium association, or common charge fees
• Delinquent property taxes
• Utilities, including electric, gas, home energy, water, and internet

Eligibility is limited to homeowners who experienced a financial hardship after January 21, 2020, and whose income does not exceed 150 percent of the area median income or 100 percent of the U.S. median income, whichever is greater. Each state or territory runs its own program with its own application portal, documentation requirements, and caps.

Loss Mitigation Options on Federally Backed Loans

Borrowers with loans backed by FHA, VA, USDA, Fannie Mae, or Freddie Mac have access to standardized loss mitigation tools. Servicers are required to evaluate struggling borrowers for these options before pursuing foreclosure.

Forbearance

Forbearance is a temporary pause or reduction in monthly mortgage payments. Under the CARES Act of 2020, borrowers with federally backed loans could request initial COVID-19 forbearance of up to 180 days, with an extension of up to 180 additional days. Forbearance does not forgive the debt; missed payments must eventually be repaid or restructured.

Repayment Plans

A repayment plan spreads missed payments over a set number of months, added on top of the regular mortgage payment, until the loan is current.

Loan Modification

A loan modification permanently changes the terms of the mortgage, typically by extending the loan term, reducing the interest rate, or capitalizing past-due amounts into the principal balance, to produce an affordable monthly payment.

Partial Claim (FHA) and Deferral (Fannie Mae/Freddie Mac)

For FHA loans, a partial claim places missed amounts into a zero-interest subordinate lien, due when the first mortgage is paid off or the home is sold. Fannie Mae and Freddie Mac offer a similar payment deferral option that moves past-due amounts to the end of the loan.

HUD-Approved Housing Counseling

The U.S. Department of Housing and Urban Development funds a nationwide network of approved housing counseling agencies that provide free or low-cost guidance to homeowners in financial distress. Counselors can review a homeowner's budget, explain loss mitigation options, communicate with servicers, and help identify state HAF resources. Homeowners can find a HUD-approved counselor by calling 1-800-569-4287 or searching the HUD agency locator.

How to Get Started

Homeowners who are struggling with their mortgage are generally advised to take three steps:

1. Contact the mortgage servicer as soon as hardship begins to discuss forbearance or loss mitigation options.
2. Apply to the state or territory HAF program to see whether grant funds can cover past-due amounts.
3. Work with a HUD-approved housing counselor to evaluate the full set of options, including refinancing, modification, or, in some cases, alternatives to foreclosure such as a short sale or deed-in-lieu.

Acting early expands the set of available options and reduces the risk of foreclosure.