Mortgage relief programs are federal and state options that help you avoid foreclosure when a financial setback makes your payments unaffordable. The main choices are the Homeowner Assistance Fund, a loan modification that permanently lowers your payment, forbearance that temporarily pauses it, and loss mitigation tools tied to your specific loan type. Federal rules also protect you from foreclosure while an application is under review.1Consumer Financial Protection Bureau. Get Homeowner Assistance Fund Help Which program fits depends on who backs your mortgage, how far behind you are, and whether your hardship is temporary or permanent.
The Homeowner Assistance Fund
The Homeowner Assistance Fund (HAF) was created by the American Rescue Plan Act of 2021 and is administered by the U.S. Treasury. It allocated $9.961 billion across states, territories, and tribes to help homeowners who fell behind on housing costs because of COVID-related hardship.2U.S. Department of the Treasury. Homeowner Assistance Fund The money can cover past-due mortgage payments, homeowner’s insurance, property taxes, utility bills, and other housing costs. Each state runs its own program with its own portal, so covered expenses and award amounts vary by state.
The fund is finite. It is scheduled to end in September 2026 or when a state’s allocation runs out, whichever comes first, and several states have already closed their programs after exhausting their funds.1Consumer Financial Protection Bureau. Get Homeowner Assistance Fund Help If your state is still accepting applications, apply now rather than waiting.
To qualify for HAF, your hardship must have occurred after January 21, 2020, or started before that date and continued past it. Your home must be your primary residence. Household income cannot exceed 150 percent of your area median income or 100 percent of the national median income, whichever is greater, and states are required to prioritize lower-income households.3U.S. Department of the Treasury. Homeowner Assistance Fund Guidance
Loan Modifications
A loan modification permanently changes the terms of your mortgage so the monthly payment becomes affordable. Your servicer can lower your interest rate, extend the loan term, or defer part of the balance. If your hardship is not going away, a modification is usually the right tool because it creates a payment you can sustain long-term.
For conventional loans backed by Fannie Mae or Freddie Mac, the standard product is the Flex Modification. It targets a 20 percent reduction in your principal-and-interest payment through a combination of a rate reduction, a term extension of up to 480 months from the modification date, and forbearing part of the principal for borrowers whose loan-to-value ratio exceeds 50 percent.4Federal Housing Finance Agency. FHFA Announces Enhancements to Flex Modification for Borrowers Facing Financial Hardship Not every borrower needs all three steps.5Fannie Mae. Flex Modification
A modification isn’t final on day one. You go through a trial period paying the proposed lower amount. If you were at least 31 days behind when the servicer evaluated your loan, the trial lasts three months. If you were current or less than 31 days late, it runs four months. Make every trial payment on time and the modification becomes permanent. Miss one and the offer typically falls apart.
Forbearance
Forbearance is a temporary arrangement where your servicer lets you pause payments or make smaller ones for a set period. You still owe everything that was paused; the question is how you repay it.6Consumer Financial Protection Bureau. What Is Mortgage Forbearance?
Repayment terms depend on your servicer and loan type. Some add the missed payments to the end of the loan as extra months. Others spread the shortfall across higher payments once forbearance ends. In some cases the full amount comes due as a lump sum when payments restart, though servicers typically work with you to avoid that.
Forbearance fits best when your hardship is temporary and you expect your income to recover. When the change is permanent, a modification is the better fit because it fixes the payment rather than deferring the problem.
Relief Options by Loan Type
The tools available to you depend partly on who insures or backs your mortgage. Conventional loans use the Flex Modification path above. Government-insured loans have their own programs.
FHA Loans
If your loan is insured by the Federal Housing Administration, you may qualify for a partial claim. Your servicer advances funds to bring your loan current, and that amount becomes an interest-free subordinate lien on your property. You owe nothing on the partial claim until you make your final mortgage payment, sell the home, refinance, or transfer the title.7U.S. Department of Housing and Urban Development. FHA Loss Mitigation Program For borrowers who fell behind but can afford the regular payment again, the partial claim clears the delinquency without changing the loan itself.
USDA Rural Development Loans
Borrowers with USDA-guaranteed loans have a distinct set of options under 2024 rules. A standard modification can capitalize past-due amounts and extend the term up to 40 years from the modification date. USDA borrowers may also qualify for a Mortgage Recovery Advance, in which the lender advances funds to cover arrears and reduce principal. The advance is capped at 30 percent of the unpaid principal balance as of the initial default date, and no monthly payments are due on that amount until the first-lien mortgage is paid off or the property is sold.8Federal Register. Single Family Housing Guaranteed Loan Program Changes Related to Special Servicing Options If those tools still don’t produce an affordable payment, USDA’s streamline servicing path requires the servicer to deliver at least a 10 percent reduction to your principal-and-interest payment without evaluating your finances.
VA Loans
Veterans with VA-backed mortgages have access to modification and repayment plans through VA’s loss mitigation framework. The VA Home Loan Program Reform Act authorized a new partial claim program for VA borrowers, and VA has been developing updated servicing guidance to implement it.9U.S. Department of Veterans Affairs. Drafting Table – VA Home Loans Contact your servicer or call VA at 1-877-827-3702 to ask which options are currently available for your loan.
Who Qualifies
Eligibility rules differ across programs, but most share a few requirements.
You need a documented financial hardship. Job loss, a significant drop in income, high medical bills, the death of a co-borrower, divorce, or a natural disaster all count. The event has to be real and provable in writing.
The property must be your primary residence. Investment properties and second homes do not qualify for HAF or most federal loss mitigation programs.3U.S. Department of the Treasury. Homeowner Assistance Fund Guidance Owner-occupied properties with up to four units generally qualify as long as you live in one unit.
Income caps apply to HAF but not to servicer-level modifications in the same way. For a Flex Modification or other servicer loss mitigation, the servicer instead evaluates whether your current income can sustain the modified payment.
Documents You’ll Need
Whether you apply through your state’s HAF portal or directly to your servicer, expect a substantial paper trail. Assembling it before you start prevents the delays that come from incomplete files.
- Federal tax returns (Form 1040) from the last two years.
- Recent pay stubs covering the last 30 to 60 days, plus consecutive bank statements for all accounts.
- A hardship letter explaining what happened, how it affected your ability to pay, and whether the situation is expected to stabilize. Keep it factual and specific.
- A monthly budget listing gross income against itemized expenses. Servicers usually provide this as a Request for Mortgage Assistance form.
- Supporting documents for your hardship: medical bills, a termination letter, an unemployment benefits statement, or a divorce decree, depending on the cause.
Accuracy matters. If the income on your pay stubs doesn’t match your bank deposits, or your reported expenses don’t line up with actual spending, the servicer may deny the application outright. Check the numbers before you submit.
How to Apply and What Happens Next
For HAF, you apply through your state’s housing agency portal. Each state manages its own program, so timelines vary. The CFPB maintains a directory of active HAF programs if you’re not sure whether your state is still funded.
For a modification or other loss mitigation, submit your package to your servicer. Most large servicers offer online upload portals, which are faster and create an automatic record. If you mail documents, use certified mail with return receipt. Faxing works too if you keep the confirmation.
Federal rules set specific deadlines for the servicer once you submit a complete application. The servicer must acknowledge receipt in writing within five business days. From there, it has 30 days to evaluate your application and tell you in writing which options it will offer, provided the application arrived more than 37 days before any scheduled foreclosure sale.10eCFR. 12 CFR Part 1024 Subpart C – Mortgage Servicing
Foreclosure Protections While You Apply
Federal law bars your servicer from starting foreclosure until your mortgage is more than 120 days past due.11eCFR. 12 CFR 1024.41 – Loss Mitigation Procedures That window exists so you have time to pursue loss mitigation before legal action begins.
Once you submit a complete application, a second protection kicks in. Your servicer cannot pursue foreclosure while your application is under review. This “dual tracking” prohibition means the servicer can’t simultaneously evaluate your modification request and push toward a foreclosure judgment or sale. Foreclosure can only proceed after the servicer tells you no option is available and your appeals are exhausted, after you reject an offered option, or after you accept one and fail to comply with its terms.
One important limitation: a servicer generally does not have to review a second application unless you’ve brought the loan current since the first one. Treat your first application as your best shot and make it complete.
If You’re Denied
A denial isn’t necessarily final. If your servicer denies a modification request, federal rules give you 14 days to file an appeal, and the servicer must respond in writing within 30 days. If the appeal produces a new offer, you get another 14 days to accept or reject it.12Consumer Financial Protection Bureau. Can I Appeal a Loan Modification Denial?
Watch the timing carefully. A servicer may deny one program while offering an alternative. If you appeal the denial and lose, you still have 14 days from the date the servicer upholds its decision to accept that alternative. Don’t let the appeal clock run out on an option that could still help.
Tax Consequences of Forgiven Debt
If your servicer reduces your principal balance or forgives part of what you owe, the IRS treats the forgiven amount as income. Your lender will issue a Form 1099-C for any canceled debt of $600 or more, and you generally have to report it on your tax return.13Internal Revenue Service. About Form 1099-C, Cancellation of Debt
For years, the Qualified Principal Residence Indebtedness (QPRI) exclusion let homeowners exclude forgiven mortgage debt on a primary residence from taxable income. That exclusion expired on January 1, 2026.14Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness If your debt was forgiven under a written agreement signed before that date, the exclusion still applies even if the discharge happened later. For any new principal reduction in 2026 without a pre-existing written agreement, the canceled amount is generally taxable.
Two other exclusions may still help. If you were insolvent when the debt was canceled, meaning your total liabilities exceeded the fair market value of your assets, you can exclude the forgiven amount up to the extent of your insolvency by filing IRS Form 982.15Internal Revenue Service. Instructions for Form 982 Debt discharged through bankruptcy is fully excluded under a separate rule.16Internal Revenue Service. Topic No. 431 – Canceled Debt, Is It Taxable or Not? Given the QPRI expiration, talk to a tax professional before accepting any modification that involves principal forgiveness so you understand the bill that may follow.
Modifications that only lower your rate or extend your term don’t trigger cancellation-of-debt income because nothing is being forgiven. Forbearance has no tax impact either, since you still owe the full amount.
Avoiding Mortgage Relief Scams
Homeowners in distress are prime targets for fraud. The clearest red flag is any company that demands payment upfront. Federal law prohibits mortgage assistance relief providers from collecting fees until you have a written agreement with your lender incorporating the relief they obtained for you.17eCFR. 12 CFR Part 1015 – Mortgage Assistance Relief Services (Regulation O) Anyone asking for money before that point is breaking the law.
Other warning signs to watch for:18Federal Trade Commission. Mortgage Relief Scams
- Requests for payment by wire transfer or mobile payment app, where recovering your money is nearly impossible.
- Instructions to stop talking to your servicer. A legitimate counselor would never tell you to cut off communication with your lender.
- Pressure to transfer your property deed. No legitimate program requires you to sign over ownership of your home.
- Guarantees of a specific outcome. No one can promise the lender will approve a modification.
- Demands to sign documents quickly without reading them. Some schemes bury a deed transfer in a stack of papers presented as loan documents.
Legitimate help is free. HUD-approved housing counseling agencies provide foreclosure prevention counseling at no cost and are certified by the Department of Housing and Urban Development.19Office of the Law Revision Counsel. 12 USC 1701x – Assistance With Respect to Housing for Low- and Moderate-Income Families Call HUD’s hotline at 1-800-569-4287 or use HUD’s website to find a counselor near you. They can help you understand your options, organize your paperwork, and communicate with your servicer. If someone is charging you for services a HUD counselor would provide for free, that alone is a reason to walk away.