The 5 Best Mortgage Loan Relief Programs Available in 2013

While the turmoil following the 2007 mortgage loan crisis has largely died down, there are still lasting effects — most notably in the form of mortgage holders who are struggling to pay their loans.

Fortunately, the federal government has created a number of mortgage relief programs to aid those who are underwater, behind on payments and/or unemployed so they don’t lose their homes to foreclosure.

While many federal mortgage relief programs have been criticized for not helping as many struggling homeowners as projected, there aren’t many other options out there. So if you’re currently behind on mortgage payments, or want to make your current loan more affordable so that you can stay current on payments, consider one of the five mortgage assistance options below.

1. Mortgage Forgiveness Debt Relief Act Extension

One of the few silver linings of last year’s fiscal cliff ordeal, the Mortgage Forgiveness Debt Relief Act of 2007 was extended for another year as part of negotiations. This should come as a weight lifted from the shoulders of homeowners who are attempting to have mortgage debt forgiven this year.

That’s because usually, debt that is written off by a lender or creditor is usually considered as income, and therefore, subject to income tax. In the case of mortgage debt, those who were forgiven tens or hundreds of thousands of dollars would still be responsible for a huge tax bill. However, in order to provide additional relief to struggling homeowners and protect them from this financial burden, the Mortgage Forgiveness Debt Relief Act was put in place — temporarily. Luckily, though set to expire at the end of 2012, it has been extended through 2013.

Mortgage Forgiveness Debt Relief Act Eligibility

The IRS explains that the act covers the following debt:

  • Up to $2 million in forgiven debt, or $1 million if married filing separately.
  • The discharge is due to reasons directly related to a decline in the home’s value or the taxpayer’s financial condition.

2. Home Affordable Modification Program (HAMP)

Homeowners who are employed but can’t afford their mortgage payments should consider applying for the Home Affordable Modification Program. This loan modification program reduces the amount owed by mortgage holders so their debt is more manageable. The catch is that your mortgage servicer must have agreed to participate in HAMP, and you can only get relief through this program if they are participating. The pool of potentially eligible homeowners was expanded in June 2012, so it’s worth checking to see if you qualify for help.

HAMP Eligibility

If you meet the following eligibility requirements as per the Making Home Affordable website, contact your mortgage provider to find out if they are participating in HAMP:

  • You obtained your mortgage on or before January 1, 2009.
  • You owe up to $729,750 on your primary residence or single unit rental property; $934,200 on a 2-unit rental property; $1,129,250 on a 3-unit rental property; or $1,403,400 on a 4-unit rental property.
  • The property has not been condemned.
  • You are behind on mortgage payments or in danger of falling behind due to financial hardship.
  • Your income is high enough to cover the modified mortgage payment and you can prove it.
  • You haven’t been convicted of real estate-related felony larceny, theft, fraud, forgery, money laundering or tax evasion in the past 10 years.

3. Home Affordable Refinance Program (HARP)

Considering how low mortgage rates have fallen in the past year, it is especially frustrating for homeowners who could stand to benefit from refinancing their loans but can’t qualify. The Home Affordable Refinance Program (HARP) is a mortgage relief program for homeowners who are not behind on their mortgage payments, but have an underwater mortgage that has prevented them from qualifying for refinancing.

The thought is that by bringing down the cost of financing a home loan, HARP can help underwater mortgage holders gain more control over their loans.

HARP Eligibility

The Making Home Affordable website states that homeowners may qualify for HARP assistance if they meet the following eligibility requirements:

  • Freddie Mac or Fannie Mae must own or back the loan, or the loan must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
  • The mortgage holder has not already refinanced under HARP, unless it is a Fannie Mae loan that was refinanced under HARP between March and May of 2009.
  • The current loan-to-value (LTV) ratio is 80 percent or more.
  • The borrower has not missed a mortgage in the past 12 months and is current on the loan at the time of refinancing.

2013 is the last year the Home Affordable Refinance Program will be available, though a possible “HARP 3.0” may be created once the current HARP program expires.

4. Home Affordable Foreclosure Alternatives (HAFA) Program

For those who are unable to make mortgage payments on time, the Home Affordable Foreclosure Alternatives (HAFA) Program exists to help them transition to more affordable living arrangements without going through a foreclosure. It’s not as great as it sounds, though; participating in HAFA means losing your home, but through a short sale or deed in lieu.

Even so, these are better options than foreclosure, and the HAFA program provides a number of really helpful benefits. For instance, homeowners who sell their property through a HAFA short sale are not responsible for the remaining mortgage deb. Additionally, HAFA may provide $3,000 in relocation assistance.

HAFA Eligibility

According to the Making Home Affordable site, you may qualify for the Home Affordable Foreclosure Alternatives Program if:

  • Your financial hardship can be documents.
  • You haven’t purchased a new home within the last year.
  • Your first mortgage is less than $729,750 and was obtained on or before January 1, 2009.
  • You haven’t been convicted of real estate-related felony larceny, theft, fraud, forgery, money laundering or tax evasion in the past 10 years.

5. Home Affordable Unemployment Program (UP)

Obviously, having no job makes it much more difficult to stay current on mortgage payments. HUD developed the Home Affordable Unemployment Program (UP) specifically for homeowners who are unemployed. UP can lower mortgage payments to 31 percent of your income, or put a 12-month or longer freeze on them.

UP Eligibility

Eligibility requirements for the Home Affordable Unemployment Program include:

  • You are presently unemployed and qualify to receive unemployment benefits.
  • You live in your home and it’s your primary residence.
  • You have never received a HAMP  loan modification.
  • You obtained your mortgage on or before January 1, 2009 and owe up to $729,750.