If you’re struggling to make your mortgage payment, government mortgage assistance programs can pause your payments, move past-due balances to the end of your loan, permanently reduce what you owe each month, or in some cases pay off arrears outright with a grant. The right program depends on who backs your loan and how long your hardship is expected to last. Start by identifying whether your mortgage is insured by FHA, guaranteed by the VA or USDA, or owned by Fannie Mae or Freddie Mac, because each has its own toolkit. On top of those, a separate federal grant program called the Homeowner Assistance Fund is still paying past-due mortgage, tax, insurance, and HOA balances in many states, but it is scheduled to stop taking applications by September 2026.1Consumer Financial Protection Bureau. Get Homeowner Assistance Fund Help
Relief Options by Loan Type
Every servicer of a government-backed loan is expected to evaluate you for loss mitigation before moving toward foreclosure. What they can offer, and in what order, depends on the agency behind your loan.
FHA Loans
If your mortgage is insured by the Federal Housing Administration, three tools do most of the work. Forbearance temporarily pauses or reduces payments while you get past the hardship. A standalone partial claim moves your past-due balance into a separate, interest-free lien that you don’t repay until you make your final mortgage payment, sell, refinance, or transfer title. A loan modification permanently changes your loan terms to give you a payment you can sustain, and you may have to complete a trial payment plan before it becomes final.2U.S. Department of Housing and Urban Development. FHA Loss Mitigation Program
The partial claim is worth understanding because it doesn’t raise your monthly payment at all. HUD covers the missed amounts and parks that debt as a zero-interest balance due only when the loan ends or you leave the property.
VA Loans
Veterans and service members with VA-guaranteed loans can access a repayment plan (regular payment plus extra each month to cover arrears), special forbearance, a loan modification that folds missed payments into the balance, an extended timeline to sell, or a short sale or deed in lieu if you owe more than the home is worth. The VA warns that a modification done when rates are higher than your original loan can actually increase your monthly payment, and that a short sale or deed in lieu could reduce your future VA loan benefit. The Servicing Purchase (VASP) program, which let the VA buy defaulted loans and modify them directly, closed to new submissions on May 1, 2025.3U.S. Department of Veterans Affairs. VA Help To Avoid Foreclosure
USDA Rural Housing Loans
Section 502 guaranteed loan borrowers move through a progression that starts with special forbearance and escalates as the hardship deepens. Total past-due balance under a forbearance plan cannot exceed twelve months of principal, interest, taxes, and insurance. A standard modification cannot exceed your original note rate and can capitalize past-due amounts and escrow shortfalls, but not late fees. For deeper hardship, USDA can extend the term up to 40 years from the modification date, aiming to bring your payment-to-income ratio close to 31 percent. A mortgage recovery advance can reimburse the lender for arrears, canceled-foreclosure legal fees, and principal reduction.4U.S. Department of Agriculture. Loss Mitigation Guide
Fannie Mae and Freddie Mac Loans
If your loan is owned by Fannie Mae or Freddie Mac, two tools cover most situations. A payment deferral moves past-due amounts to the end of your loan as a non-interest-bearing balance and keeps your monthly payment the same. Recent policy changes let borrowers defer up to six months of missed payments this way.5Federal Housing Finance Agency. FHFA Announces Enhanced Payment Deferral Policies for Borrowers Facing Financial Hardship The Flex Modification permanently restructures the loan, may include a reduced interest rate, and can extend the remaining term up to 480 months from the modification date.6Fannie Mae. Flex Modification Borrowers less than 90 days behind must submit a complete application; those 90 or more days delinquent may be evaluated without one.7Federal Housing Finance Agency. Loss Mitigation
The Homeowner Assistance Fund
The Homeowner Assistance Fund is a federal grant program created by the American Rescue Plan Act for homeowners who fell behind on housing costs because of the financial effects of COVID-19.8U.S. Department of the Treasury. Homeowner Assistance Fund Money went to states, territories, and tribal entities, and each jurisdiction runs its own version with its own maximum grant amount and application process.
HAF covers more than the mortgage itself. Depending on your state, funds can pay delinquent property taxes, homeowner association fees, utility bills, and homeowner’s insurance. Payments go directly to your servicer, tax authority, or utility company, which clears the debt without passing through your hands. To qualify, you need a financial hardship after January 21, 2020, and household income at or below 150 percent of the area median income or 100 percent of the national median income, whichever is greater.9U.S. Department of the Treasury. Homeowner Assistance Fund Guidance
The program is scheduled to end in September 2026 or whenever a state’s funds run out, whichever comes first. Some state programs have already exhausted their allocations, so confirming whether your state is still accepting applications should be your first step.1Consumer Financial Protection Bureau. Get Homeowner Assistance Fund Help
Who Qualifies
Eligibility rules vary, but common threads run through nearly all of these programs. You need a genuine financial hardship affecting your ability to pay: job loss, a significant income drop, death of a wage earner, divorce, or major medical expenses all qualify. The hardship can be resolved, ongoing, or permanent, and the type of relief you’re offered will reflect how long it’s expected to last.
The property generally must be your primary residence. Investment properties and second homes are excluded from most government loss mitigation programs. The standardized Mortgage Assistance Application asks whether the property is owner-occupied, renter-occupied, or vacant, and whether you want to keep it, sell it, or transfer it to your servicer.10Federal Housing Finance Agency. Mortgage Assistance Application
You don’t necessarily have to be months behind. Some programs accept borrowers in “imminent default,” meaning you’re technically current but can show that missing payments is unavoidable.
How to Apply
A complete application package is what gets you evaluated quickly. Incomplete submissions are the most common reason for delays, and servicers can stall your review until they have every piece. Before you start, gather:
- Your most recent pay stubs covering at least the last two months
- Two years of federal tax returns
- Consecutive bank statements for all accounts
- A detailed monthly budget
- A written hardship letter explaining what caused you to fall behind
Self-employed borrowers should expect to add profit-and-loss statements or balance sheets and the IRS schedules that match their business structure. Twelve consecutive months of documented business activity strengthens the application.
Submit everything through a method that gives you proof of delivery: certified mail, fax with a confirmation page, or the servicer’s secure portal. The submission date matters because it triggers legal protections against foreclosure activity while your file is under review. Federal regulation requires the servicer to send written acknowledgment within five business days confirming whether your file is complete or telling you what’s missing. If complete, the servicer has 30 days to evaluate you for every loss mitigation option you’re eligible for and send a written determination.11eCFR. 12 CFR 1024.41 – Loss Mitigation Procedures
Legal Protections While Your Application Is Reviewed
Federal rules under Regulation X create real guardrails around foreclosure while you’re seeking help.
The 120-Day Pre-Foreclosure Window
A servicer cannot begin the foreclosure process until your loan is more than 120 days delinquent. This four-month period exists specifically to give you time to apply. If you submit a complete application during it, the servicer is blocked from filing any foreclosure notice or court action until they’ve evaluated you, offered or denied relief, and exhausted the appeal process.12Consumer Financial Protection Bureau. 12 CFR 1024.41 – Loss Mitigation Procedures
Dual Tracking Prohibition
Even if foreclosure has already started, submitting a complete application more than 37 days before a scheduled foreclosure sale blocks the servicer from moving forward with a judgment, sale order, or the sale itself until the evaluation and any appeal are done. Violations of this “dual tracking” prohibition are among the most common complaints filed against mortgage servicers.12Consumer Financial Protection Bureau. 12 CFR 1024.41 – Loss Mitigation Procedures
Your Right to Appeal
If the servicer denies you for a loan modification and you submitted a complete application at least 90 days before the foreclosure sale, you can appeal. You have 14 days from the date of the denial to file. The appeal must be reviewed by different personnel than the ones who evaluated your original application, and the servicer has 30 days to decide. No further appeal is available after that.13eCFR. 12 CFR 1024.41 – Loss Mitigation Procedures
Tax Consequences of Forgiven Mortgage Debt
Most homeowners don’t think about this until it’s too late. When a lender forgives part of your mortgage through a modification, short sale, or foreclosure, the IRS generally treats the forgiven amount as taxable income. Your lender will report it on Form 1099-C, and you’re expected to include it on your tax return for the year of the cancellation.14Internal Revenue Service. Canceled Debt – Is It Taxable or Not
For years, the Mortgage Forgiveness Debt Relief Act shielded homeowners from this by letting them exclude up to $750,000 of forgiven debt on a primary residence. That exclusion expired on December 31, 2025.15Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness As of 2026, unless Congress passes a new extension, forgiven mortgage principal on your home is taxable income again.
One safety valve remains. If you’re insolvent when the debt is forgiven, meaning your total liabilities exceed the fair market value of your total assets, you can exclude the forgiven amount up to the extent of your insolvency. Insolvency is measured immediately before the discharge, and the excluded amount can’t exceed the gap between what you owe and what you own. Many homeowners facing foreclosure or a principal reduction do qualify, but you’ll need to document it carefully, and talking with a tax professional before accepting any modification that writes off principal is worth the cost.
Not every form of relief creates taxable income. Forbearance, payment deferrals, and term extensions don’t forgive debt; they only change when and how you repay it. The tax question arises only when a lender actually writes off part of what you owe.
Avoiding Scams and Getting Free Help
Fraud in this space is aggressive and targets people at their most vulnerable. The single most important rule: under the federal Mortgage Assistance Relief Services Rule, it is illegal for any company to charge you a fee for mortgage modification services before they’ve delivered a written offer from your lender that you’ve accepted.16Federal Trade Commission. Mortgage Assistance Relief Services Rule – A Compliance Guide for Business Anyone asking for money upfront is breaking the law.
Other warning signs include being told to stop communicating with your lender or send your payments to the company instead, pressure to pay by wire transfer or mobile payment app, requests to sign over your deed, claims of government affiliation, and promises of “forensic loan audits” that supposedly cancel your loan.17Federal Trade Commission. Mortgage Relief Scams You always have the right to contact your lender directly, and everything these companies claim to do is something you can do yourself for free.
HUD-approved housing counseling agencies offer foreclosure prevention help at little or no cost. A counselor can walk you through your options, review your finances, help you prepare the application, and communicate with your servicer on your behalf. Find one through the Consumer Financial Protection Bureau’s search tool or by calling (855) 411-2372.18Consumer Financial Protection Bureau. Find a Housing Counselor