COVID-19 Mortgage Relief for Homeowners Facing a Payment Crisis

The COVID-19 pandemic left many Americans dealing with reduced income or unemployment. The federal agencies and government-sponsored enterprises (GSEs) that buy and insure mortgages developed programs to provide mortgage relief options to affected homeowners.

Depending on your mortgage type, the deadline for these programs may have passed. But some lenders and state governments have also taken independent action to provide mortgage relief to homeowners. The federal government has also stepped in with the Homeowner Assistance Fund, which is being administered by states, territories and tribal governments.

If you’re worried about paying your mortgage or repaying a forbearance, a mortgage relief program below may be able to help. For more details, read about the options available for your loan type and reach out to your lender.

The kind of mortgage you have may determine what types of assistance are available to you.

• The GSEs — Fannie Mae and Freddie Mac — deal with conventional loans.

• The Federal Housing Administration insures FHA loans.

• The Department of Veterans Affairs guarantees VA loans.

• The Department of Agriculture offers USDA loans.

You can find out if your conventional mortgage is owned by Freddie Mac or Fannie Mae using the loan lookup tools on their websites.

To verify whether you have an FHA, VA or USDA loan, find your closing documents (either hard copies or electronic versions) and look for the Closing Disclosure. In the upper right of the first page of this document, under "Loan Information," you'll see check boxes indicating your loan type: conventional, FHA, VA or other.

If you can't locate this document, try looking at your monthly mortgage statement or contacting your lender at the phone number listed on the statement.

Regardless of mortgage type, contact your lender to discuss relief options. The federal government has encouraged all lenders to support homeowners who need mortgage assistance due to hardship brought about by the coronavirus pandemic.

» MORE: What do Fannie Mae and Freddie Mac do?

Forbearance is an agreement with your lender that lets you make a reduced payment or no payment for a set amount of time. Interest accrues, and the skipped amount needs to be paid after the forbearance period ends.

Under normal circumstances, forbearance typically lasts about three months, but longer periods have been available to homeowners dealing with financial issues during this pandemic.

Before you start forbearance, make sure your lender offers repayment terms that seem reasonable. Repayment may be expected as a lump sum at the end of forbearance, sometimes called a "balloon payment." If a lump-sum payment doesn’t sound feasible, try to negotiate for another option.

Fannie Mae and Freddie Mac — along with the FHA, VA and USDA — have required lenders to offer options other than lump-sum repayment to borrowers using COVID-19 forbearance. The agencies and GSEs have also barred lenders from charging additional fees, penalties or interest during forbearance beyond what would have normally accrued.

Lenders shouldn't report forbearance to the credit bureaus. Since the lender has agreed to allow you to skip those payments, they don't count as missed payments; you're still up to date on your mortgage. So long as you're able to successfully leave forbearance, taking advantage of this type of program when you need it shouldn't keep you from being able to refinance or buy again.

If you are unable to resume your normal monthly payments at the end of your forbearance period, you may be able to ask your lender for a loan modification. A modification changes the terms of your mortgage in order to make your payments more affordable.

Conventional loan borrowers are eligible for up to 12 months of forbearance, which won't be reported to the credit bureaus. If you were already in an active forbearance as of Feb. 28, 2021, you may request up to two additional three-month periods of forbearance (up to 18 months total).

If, at the end of the forbearance term, you’re able to go back to your regular mortgage payments but are unable to pay anything additional, you may be eligible for COVID-19 Payment Deferral. With that deferral, the amount of the forbearance won't accrue interest and would not be due until the end of the mortgage — whether that’s when you sell, refinance or pay off the loan.

Even if you are ineligible for deferral, your lender cannot demand a lump-sum repayment and is required to work with you to find a different solution.

If you are unable to resume your regular mortgage payments at the end of your forbearance, you have options. The Federal Housing Finance Administration, which supervises Freddie Mac and Fannie Mae, is discouraging lenders from pursuing foreclosure. Instead, you may be evaluated for a loan modification, which changes the terms of your mortgage.

Both Freddie Mac and Fannie Mae offer the Flex Modification. This loan modification aims to reduce your monthly mortgage payment amount by up to 20% by rolling missed or forborne payments into the total loan amount, extending the mortgage term, and for some borrowers, changing the interest rate or allowing you to make payments against a lower principal balance. The Flex Modification also makes your loan current with your lender and on your credit report. In other words, you're no longer missing any payments.

Contacting your lender directly is the first step you should take in order to obtain a forbearance or be considered for a loan modification. This is especially important because the GSE moratoriums on foreclosures and evictions have ended. You can also find more information on the Freddie Mac or Fannie Mae websites.

The FHA deadline for requesting initial COVID-19 forbearance was May 31, 2023. Forbearance must end no later than Nov. 30, 2023 for FHA borrowers currently in forbearance.

If you are having trouble making your mortgage payments and you missed the window for COVID-19 forbearance, the FHA always has several mortgage relief programs in place. These include standard mortgage forbearance lasting up to six months and special forbearance for unemployment.

If you are able to resume your regular home loan payments at the end of your FHA forbearance term, but you cannot repay some or all of the payments you missed, you may be eligible for the Department of Housing and Urban Development's (HUD's) COVID-19 Recovery Standalone Partial Claim. This is a no-fee, no-interest junior lien (a type of second mortgage) that doesn't have to be paid back until you sell your home, pay off your mortgage or otherwise end the loan.

If you reach the end of your FHA forbearance or are 90 or more days delinquent on your FHA loan and you meet certain eligibility requirements, your mortgage servicer is required to offer you a COVID-19 Advance Loan Modification. The ALM is a 30-year modification that will make your loan current and reduce your monthly principal-and-interest payment by at least 25%. It's a 30-year modification, so no matter how far along you were with your existing loan, you'll now be starting over with a new 30-year term.

FHA borrowers who cannot resume their loan payments at the end of their forbearance may be eligible for the COVID-19 Recovery Modification. Like the ALM, this modification should reduce your principal-and-interest payment by at least 25%. Any amount you were unable to pay gets added to your loan balance, which does increase the amount of principal you owe. To keep the payments manageable, your loan will be reamortized, so you'll start over with a new 30-year or even a 40-year loan. (The FHA is not offering 40-year mortgages; this loan term is only available to certain borrowers under this type of loan modification.) The Recovery Modification can also be combined with a Partial Claim.

The FHA says it offers other repayment options for homeowners who are ineligible for the Standalone Partial Claim. And if you are offered an ALM but choose not to take it, you're still eligible for other repayment options. No matter which you choose, FHA lenders cannot require a lump-sum repayment.

The FHA foreclosure and eviction moratoriums have ended, so if you have missed mortgage payments and don't seek a modification, you could face foreclosure and eviction. The FHA is urging borrowers to contact their mortgage servicers as early as possible about mortgage payment relief options. You can also get more information on the HUD website.

The Department of Veterans Affairs deadline to apply for an initial COVID-19 forbearance was May 20, 2023. The VA offered borrowers a six-month forbearance, which could be extended another six months.

The VA offers additional options for borrowers whose forbearance is expiring, including the VA Disaster Extend Modification, if you can make your regular mortgage payments but won't be able to repay your forbearance.

The Department of Veterans Affairs' moratoriums on foreclosures and evictions have expired. That makes it crucial to seek assistance if you are behind on your mortgage or in danger of missing a payment. Contact your lender to learn more about your options, or see additional mortgage assistance information on the VA website.

If your mortgage is backed by the USDA Rural Housing Service, the USDA deadline to apply for initial forbearance was May 31, 2023.

If your USDA forbearance is ending and you are unable to resume monthly loan payments, you may be eligible for USDA COVID-19 Special Relief Measures. This loan modification aims to reduce your monthly mortgage payment by up to 20%. Your servicer will work with you to reduce your interest rate; if that doesn't provide enough relief, you may be able to have the term extended as well. Borrowers may also be considered for a Mortgage Recovery Advance, which provides funds to help cover past-due payments and other costs that do not have to be repaid until the end of the loan.

If you are delinquent on your USDA loan, you could face foreclosure or eviction, as these moratoriums have expired. Contact your lender if you are concerned about making your USDA loan payment, or find more information on the USDA website.

Not all mortgages are backed by government agencies or the GSEs. Sometimes called "portfolio loans," these mortgages aren't resold and are kept in-house by the lender. Portfolio loans — which can include mortgages for self-employed borrowers, borrowers who are not U.S. citizens or borrowers who have experienced a foreclosure — don't meet Freddie Mac and Fannie Mae's standards. Lenders may also choose to hang onto a mortgage for other reasons.

Portfolio loans aren't covered by any of the mortgage relief programs listed above. However, your lender may have its own assistance programs. Follow the steps in the next section to contact your lender.

» MORE: What to do if you can't pay your mortgage

No matter what type of loan you have or what government assistance may be available, contact your lender directly if you have concerns about paying your mortgage.

You don't have to wait until you are delinquent on your mortgage, and calling before you miss a payment will likely give you more mortgage relief options. If you've already missed a payment when you ask for forbearance, that delinquency may show up on your credit report (and stay there until the loan is made current again).

Here's what you should have ready when you contact your lender:

• An estimate of your current income (and future income, if you anticipate that it may change).

• An estimate of your current monthly expenses.

• Your most recent mortgage statement.

• Documentation of what caused your situation to change.

Beware of third parties offering mortgage assistance. Look for help from your lender, not from other organizations offering mortgage relief. If you want to get advice about talking to your lender, find a HUD-approved financial counselor on the HUD website. These counselors offer no-cost assistance and can help you be better prepared to call your lender.

You can also find more information on all of the programs listed above at the Consumer Financial Protection Bureau website.

On top of the programs listed above, the Biden administration's American Rescue Plan created the Homeowner Assistance Fund. The HAF earmarks $9.961 billion to provide relief to homeowners affected by the pandemic, providing funds for mortgage assistance and also potentially to help pay homeowners insurance, utility bills, homeowners association fees and more.

These funds are being distributed through state, territorial and tribal governments. In many areas, eligible homeowners can use HAF funds in addition to the forbearance and loan modification programs described above. Homeowners will need to meet eligibility requirements, including an income limit and an experience of financial hardship due to the pandemic, and the funds can be applied to primary residences only.

Not every state is currently accepting applications. You can check your state or territory's status with an interactive map on the National Council of State Housing Agencies website.