Business & Finance mortgage

Hardship Mortgage Programs

By Business & Finance Last updated Monday, April/15/2024

If you're struggling to pay your mortgage, consider a hardship program.dollars image by Mikhail Olykainen from Fotolia.com

The owners of more than 315,000 properties in the United States received foreclosure filings in January of 2010, according to real estate data firm RealtyTrac.com. If you, too, are struggling to pay your mortgage loan payments on time, you might consider enrolling in a mortgage hardship program. These programs are designed to reduce the financial stress on homeowners struggling to pay their mortgage bills. The programs do this by either reducing the amount of money you owe on your mortgage loan, reducing the loan's interest rate or restructuring the terms of your home loan, all of which can lower your monthly payment. If you're worried that you, too, are facing a foreclosure notice, it's time to investigate mortgage hardship programs.

Making Home Affordable Modification Program

The federal government in 2009 launched its own mortgage hardship program, the Making Home Affordable Modification Program. This program provides financial incentives to banks and mortgage lenders to persuade them to modify the home loans of homeowners who are in danger of falling behind on their payments.

Homeowners who owe $729,750 or less on their first mortgages, are struggling to make their payments and took out their loans on or before Jan. 1, 2009, might be eligible for a mortgage loan modification through the program. Homeowners must also be saddled with a mortgage payment that is more than 31 percent of their gross monthly income.

Homeowners need to contact their current mortgage lenders to start the modification process. The government itself does not modify any loans.

Several national lenders offer their own hardship mortgage programs, including lending giant CitiMortgage. Depending on the severity of borrowers' financial situations, CitiMortgage may lower the principal balance of its clients' loans, reduce the interest rates attached to them, lengthen the term of the loans or restructure the terms in some other way, all to lower the monthly payment that struggling borrowers face.

To apply for CitiMortgage's hardship program, borrowers must send the company dated copies of their most recent paycheck stubs, federal income tax return and bank savings and checking account statements.

Your state's local housing finance authority may offer its own hardship mortgage program. One example is the Keep the Dream program offered by the State of New York Mortgage Agency.

This program gives families with riskier mortgages, such as adjustable-rate or interest-only loans, the chance to refinance into safer 30- and 40-year fixed-rate mortgage loans with lower monthly payments. By refinancing, struggling homeowners might be able to avoid losing their homes to foreclosure.

Borrowers are eligible for the New York program if they own a home in the state and can provide proof that they have experienced a serious financial setback, such as a job loss, that has made their once-affordable mortgage payments a financial burden.