How to Manage Your Mortgage When You’re Unemployed

Very little in life can cause a greater feeling of hopelessness than losing your job. Not only are you losing your source of income, but you could also potentially lose your home itself. It’s frightening, and it feels as if you have no control over the situation. But thankfully, that isn’t the case.

There is hope, after all. There are several programs designed to help with mortgage payments, which can keep a roof over your head while saving you money as you work to get back on your feet. If you require unemployed mortgage assistance, explore the following programs:

  • Hardest Hit Fund
  • Mortgage Forbearance Agreements
  • Loan modifications

These options are all designed to provide mortgage assistance for unemployed people. For more information on each, read on.

Hardest Hit Fund Program

The Hardest Hit Fund is a program created by the United States Treasury Department in 2010 to provide support to unemployed homeowners in states with dropping property values and high unemployment rates. It is currently available in 18 states and the District of Columbia.

If you were laid off or otherwise lost your job through no fault of your own, you could be eligible for assistance through the Hardest Hit Fund. The program was designed to provide relief for distressed homeowners generally but is typically used to provide help with mortgage payments for homeowners that are out of work.

The funds are allocated primarily to bring your home loan current and cover future mortgage payments. If you qualify, the HHF can be one of the best ways to receive help with mortgage coverage and be able to remain in your home without concern while you look for work.

However, this program is time-sensitive. It was established for a limited period, and will be accepting applications through December 31, 2020. After this point, no new applications will be accepted, and the program will end. And some states have already exhausted the allocated funds. So be sure not to wait before you explore this option.

Mortgage Forbearance Agreements

Forbearance agreements are special agreements made between homeowners and mortgage lenders when the homeowner is unable to pay because of some temporary hardship, typically unemployment. During forbearance, mortgage payments will be temporarily suspended or reduced.

The suspended payments will have to be made up in some way. When the forbearance period ends, you will have to get current on your loan in one way or another. Typically, that would be by paying a larger monthly payment until you get current, or by adding the deferred amount onto the end of your mortgage payments, but you might also simply pay your lender a lump sum.

Forbearance doesn’t save you any money, and often results in a larger overall payment because of extended time for interest to add up. But during a forbearance period, you are not subject to the risk of foreclosure.

If you have a mortgage loan insured by the Federal Housing Administration (FHA), you may be eligible for an FHA Special Forbearance. Under Special Forbearance, the FHA requires lenders to suspend payments for a forbearance period of 12 months when homeowners demonstrate loss of income due to unemployment.

Loan Modification Program

Where forbearance is a temporary agreement to suspend payment before ultimately resuming under the original terms of the mortgage, loan modification is an agreement between the servicer and the borrower to change the terms of the mortgage itself. That may help with mortgage payments by lowering what you owe each month or otherwise altering the loan.

A tricky part of loan modifications for those that have lost their jobs is that you still have to be able to demonstrate that you will be able to pay your mortgage under the new circumstances. But if you are able to do so, this can be one of the best ways to get yourself in a more favorable situation that allows you to stay in your home despite your hardship.

If Freddie Mac or Fannie Mae own your loan, modification is an option you should definitely explore. If you can demonstrate financial hardship while also showing the ability to pay your loan, you could qualify for the Flex Modification Program. That program allows borrowers to decrease their payments by about 20%.

There are also modification programs available through many private lenders, but these will have their own in-house standards in order for homeowners to qualify.

The Bottom Line

Keeping your home after losing your job can be an incredible challenge. Unemployment can be a truly oppressive feeling, and handling your mortgage payments during this time might feel impossible. But despite this hopeless feeling, there are several paths forward.

If your state is a part of the Hard Hit Fund, be sure to apply immediately before the program ends in December 2020. Otherwise, you can explore a loan modification if you can still demonstrate a source of income, or forbearance to put your payments on hold until you get back on your feet.