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Making Home Affordable Program (MHA) Options for Struggling Homeowners

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Homeownership has a lot of benefits, but when difficulties strike, it can feel particularly overwhelming — not only is your financial health at stake, so is the roof over your head.

If you are having a hard time making payments on your home, foreclosure isn’t your only option. There are a few programs specifically for homeowners who need help staying in their homes.

The U.S. Department of the Treasury introduced the Making Home Affordable® program in 2009; one of its most recognizable components was the Home Affordable Modification Plan (HAMP). But even though HAMP no longer accepts new modification applications, homeowners who are “underwater” in their loans or struggling to make payments may qualify for a few other programs.

We’ll walk you through some of the government programs that may be able to help you stay in your home and other options to ward off foreclosure.

Government programs for struggling homeowners

While you may not be able to apply for help through HAMP, there are other programs that can provide assistance if you are struggling with your home payments.

Stephanie Hanson is a housing counselor and director of homebuyer services for the Community Development Corporation of Utah, a nonprofit based in Salt Lake City. She is seeing return clients who previously participated in HAMP and are back for help, many having reached the five-year mark when interest rates begin to gradually rise.

“People at a higher risk of foreclosure are those who’ve participated in HAMP or had another loan modification,” said Hanson. “Loan rates have gone up, so another modification may actually make their loan payments higher.”

In other words, make sure you fully understand the details of any program you may enter.

HARP: Also created in 2009, the Home Affordable Refinance Program (HARP) was announced by Treasury and the Federal Housing Finance Agency, which sets financial priorities and expectations for mortgage giants Fannie Mae and Freddie Mac. While HAMP helped homeowners modify their loans, HARP helps them refinance their loans, allowing them to lower their monthly interest rate, switch from an adjustable to a fixed-rate mortgage or get a shorter loan term. Additionally, the program can help homeowners build equity faster and lower closing costs.

How to qualify:

First, move fast. Applicants interested in a refinance with HARP must submit their application before Dec. 31, 2018.

And you must meet the following criteria:  

  • You must be current on your mortgage.
  • No late payments of 30+ days in the last six months, and no more than one in the past 12 months.
  • The property for which you seek a refinance must be your primary residence, a one-unit second home, or an investment property with up to four units.
  • Your loan must have originated before May 31, 2009, and it must be owned by Freddie Mac or Fannie Mae.

Applicants are not required to have a specific credit score, but there is a loan-to-value (LTV)  requirement of at least 80 percent. There are no underwater limits and most homeowners will not be required to have an appraisal or have their loan underwritten. Some lenders may require that the applicant prove they have 12 months of mortgage payments saved.

With many traditional refinance programs, people who want to refinance their homes may be unable to qualify if they owe more on their home than the property is worth, which is known as being “underwater” on their property. The term underwater can also be called “negative equity.” A homeowner could make all of their payments on time and still be in an underwater property if market values shift.

Hardest Hit Fund: Residents of certain states may be eligible for financial assistance through the Hardest Hit Fund. The federal government created this program in 2010 to help families from specific areas recover from the housing crisis of 2007. The government allocated an additional $2 billion in 2016 to continue funding the program though certain states have discontinued their programs. Interested parties have until 2020 to take advantage of the money available.

States or cities that were selected to receive help from these programs have unemployment rates at or above the national average or housing prices that have declined by 20 percent or more. These include:

  • Alabama
  • Arizona
  • California
  • Florida
  • Georgia
  • Illinois
  • Indiana
  • Kentucky
  • Michigan
  • Mississippi
  • Nevada
  • New Jersey
  • North Carolina
  • Ohio
  • Oregon
  • Rhode Island
  • South Carolina
  • Tennessee
  • Washington D.C.

Qualified participants may receive mortgage payment assistance (if the homeowner is unemployed or underemployed), principal reduction on their loan so they can get into more affordable housing, blight elimination, and down payment assistance. The program is specifically designed for unemployed homeowners who are underwater in their homes.

Eligibility requirements vary by state; you can check out this list from Making Home Affordable for more details.

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State programs for struggling homeowners

If you don’t qualify for either of the above federal programs, you may still qualify for assistance through a state program. Qualification and application standards may vary, so you’ll want to check with local agencies regarding the specific application process.

A few programs you may find with your state agency include:

New Jersey Housing and Mortgage Finance Agency:

The New Jersey Housing and Mortgage Finance Agency offers foreclosure mediation services to qualified homeowners. To qualify, participants must own a property that’s involved in a foreclosure process, and borrowers must request services within 60 days of their foreclosure summons. The borrower must be living in the property and may not be in bankruptcy at the time they ask for mediation.

Florida Foreclosure Counseling Program

Florida ended its Hardest Hit program in January. However, the state still offers other resources to its constituents, through its Foreclosure Counseling Program. This program offers foreclosure prevention and financial management education provided by HUD-approved agencies.

Foreclosure Prevention Program

The state of Illinois offers various foreclosure programs including the Circuit Court of Cook County Mortgage Foreclosure Mediation Program, the Illinois Hardest Hit Program and Project Reinvest.

Homeowner Protection Program (New Mexico)

Residents in New Mexico who are concerned about losing their homes can take advantage of the Keep Your Home New Mexico program. Other programs in the state include a foreclosure settlement facilitation project and credit counseling.

If you need help with your mortgage, Hanson recommends checking with your local Housing and Urban Development (HUD) office to see what type of help they can offer. You can find a list of HUD offices by state on the HUD website. “There is help available. Most of help is educational, and assistance with paperwork and processes, but it’s there,” she said.

You can also find individual state programs listed on the National Council of State Housing Services website. Each listing also includes a website address where you can learn more about housing services in your area.

If foreclosure looms: tips to help

For most homeowners, losing their home isn’t just a blow financially — it can also be an emotional and psychological struggle. One way to help alleviate some of the stress is to understand all of your options. Even if you are unable to avoid a foreclosure, knowing you took every possible step to prevent or prepare for the process can offer some relief.

If you are unable to keep up with your house payments and you are concerned that you won’t be able to keep your property, be proactive. The earlier you address the issue, the more time you have to get help, and you may even be able to save your home. Gather all of your financial information (including mortgage statements, other debt statements, proof of income, etc.). When you speak with your lender or other agency, having these documents on hand will make it easier and faster for you to find help.

Some alternatives to foreclosure include:

Debt counseling: Talking to a debt counselor is a smart first move. Your counselor may be able to help you keep your home. If you are unable to keep your home, they can provide helpful information for navigating the foreclosure process as easily as possible, including offering help for relocating to more affordable housing. One of the most important things you can do is talk to someone who can help you explore all of your options and help you work with your lender.

Reverse mortgage: A reverse mortgage may make sense if you are 62 or older and struggling to make payments. There are specific requirements to qualify for this type of loan as well as pros and cons. In addition to being at least 62, the home must be your primary residence. A reverse loan may make it possible for you to pay off the balance on your mortgage. It is repaid when the borrower dies, sells or moves. However, borrowers are still responsible for maintaining the property and paying property tax.

Loan modification: If your monthly payments are too difficult, you may consider a loan modification. A loan modification changes the terms of your mortgage so that you have lower monthly payments. The modification could be refinancing from an adjustable rate mortgage to a fixed rate mortgage, refinancing to a lower interest rate, or reducing the total balance on your loan. Your lender may be able to help you make adjustments so you can avoid foreclosure.

Deed in lieu of foreclosure: When a borrower asks for a deed in lieu of foreclosure, they offer the lender the deed to their home so they don’t have to foreclose on the property. This process could keep you from being liable for any remaining balance. The lender cannot force a borrower into this process, and a borrower cannot force the lender to accept the deed in lieu of foreclosure. In fact, a lender may decline to enter this agreement if there is a second mortgage or other liens on the property. Borrowers should speak with their lender and a loan/credit counselor to determine if this option is most beneficial — if your property is worth more than you owe, turning over your deed means you don’t get any of the profit for the sale of the property.

According to Hanson, this process has equivalent effect on a credit score as a foreclosure, but offers more flexibility for the homeowner. Lenders who work with homeowners on this process may offer some financial help so the homeowner can get out of their home.

“If you have exhausted all other options, and you know you won’t be able to keep the home, this is a negotiated exit strategy,” Hanson said. Homeowners should be aware, however, that they will have to meet certain requirements — including leaving the home in good repair.

Short sale: You may be able to avoid foreclosure by going through a short sale process. A short sale allows you to sell your home for less than the balance of your loan. Depending on your state, you may or may not be responsible for the difference between the sales price and the balance of your loan.

Example: If you owe $250,000 on your home, and you sell the property for $200,000, some states allow the lender to sue you for the remaining balance. If you live in a state that allows the lender to come after the extra money, you may attempt to get them to agree not to sue you before you begin the short sale process.

“A short sale is better [than foreclosure]. It will still hurt your credit score, but it’s much easier to recover from, because you took care of that problem,” Hanson said.

But while a short sale will affect your credit score negatively, according to Hanson, it may be advantageous if you want to purchase a house in the future. “For most cases, a foreclosure prevents a homeowner from getting a new mortgage for four full years. In a short sale, you can sometimes buy again after two years.”

Hanson noted that if a home is going to sell for less than the loan amount, homeowners could also consider taking out a personal loan to cover the remaining balance, if they are financially able. This type of option works best for someone who needs to sell their home quickly for relocation, but the housing market isn’t working in their favor.

Reduce expenses: Depending on a homeowner’s income level, they may qualify for help with their local welfare services. Food stamps, health insurance coverage, and other programs can free up some money to help cover housing expenses.

Further, Hanson notes that homeowners can take advantage of the fact that they still own their home: “If they are going to be foreclosed on, and there’s no way to avoid it, they can continue to live in the home until the foreclosure date.” Owners could save some money over a few months for funds to rent a new place once the process is complete.

The biggest thing homeowners in financial trouble should remember, said Hanson, is that a house is just a house.

“Your home is where your family is. As much as we get attached to our houses, don’t let those sticks and bricks make you feel like you’re never going to be happy again. I’ve seen people move out and move on, and it reduces a lot of stress, and they are happier and able to recover. It’ll work out.”


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