Financial Overhaul: How Do I Get Mortgage Modifications After Losing a Job?

losing a job mortgage revisions

The economic misery that began with the 2007-2008 housing market meltdown has taken a heavy toll on millions of Americans. Housing prices are only now beginning to recover from large losses and unemployment remains stubbornly high. Losing a job is a problem; losing your job and your house is a crisis. The federal government has stepped in with a couple of programs that offer hope.

Loan Modifications

A lender may agree to a temporary or permanent mortgage loan modification — a change to a mortgage’s interest rate, outstanding balance or number of payments. Financial advisor Frank Poschinger explains that “banks and other lenders may agree to loan modifications in order to avoid foreclosing on properties, especially if borrowers can show financial hardships that were beyond their control.” The U.S. Department of Housing and Urban Development, or HUD, sponsors several programs aimed at facilitating mortgage modifications. Two of these programs provide a pathway for unemployed homeowners to receive a mortgage modification. Poschinger adds, “Your mortgage servicer may offer forbearance options for those who do not qualify for the government programs — contact your servicer directly for more information.”

Home Affordable Unemployment Program

The Home Affordable Unemployment Program, known as UP, is a program under the Making Home Affordable initiative of the U.S. Treasury Department and HUD. Under UP, you may qualify for a reduction in your mortgage payments so that they do not exceed 31 percent of your gross monthly income, including unemployment benefits. Alternatively, you may be able to avoid mortgage payments for a year or longer. To qualify, you must be unemployed and eligible for unemployment benefits. The home must be your primary residence with a mortgage that has not previously received a loan modification under the Home Affordable Modification Program, or HAMP. The mortgage must predate January 2, 2009, and you must owe less than $729,751.

Applying for UP

Your mortgage servicer must participate in the HAMP program to offer UP assistance. Currently, more than 100 servicers participate in HAMP. If Fannie Mae or Freddie Mac holds your mortgage, you must apply directly regarding their mortgage forbearance programs, which were expanded in January 2012. To help determine whether you qualify for UP or other programs, the Making Home Affordable program encourages you to contact one of their approved housing counselors, at no cost to you. The phone number is 888-995-HOPE. A counselor will explain your options and help you fill out the UP application form. Ultimately, the decision to make the loan modification lies with your mortgage servicer, but HUD claims you have a better chance of success if you work with a HUD-approved counselor.

Hardest Hit Fund

The unemployed may also qualify for mortgage payment assistance under the U.S. Treasury’s Hardest Hit Fund, established in 2010. The fund provides more than $7.6 billion to homeowners in 19 states that have suffered the most from the economic downturn. The HHF offers various alternatives, such as principal reduction and elimination of second lien loans. It may also help homeowners transition to more affordable housing. HHF funds are administered by the individual states. To apply, you must contact your state housing finance agency directly. A list of agencies is available at the Treasury Department’s HHF website.