What Circumstances Justify a Mortgage Modification?

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Whether you're undergoing a financial hardship or just paying too much for your mortgage, government mortgage modification programs are available to borrowers looking to lower their monthly payments. The government provides incentives to lenders that participate to make these programs possible. The lender will lower your monthly payment by extending the loan term, reducing the principal, adjusting the interest rate or a combination of the three. However, to qualify for any of these programs, you must meet the eligibility requirements.


Government-supported mortgage modifications are administered by Making Home Affordable, a program of the Department of the Treasury and the Department of Housing and Urban Development. The programs are as follows: Home Affordable Modification Program, Home Affordable Refinance Program, Principal Reduction Alternative and Home Affordable Unemployment Program. Each program has its own benefits and eligibility criteria. Which one is best for you depends on your specific circumstances. To qualify for any of these mortgage modification programs, you must have obtained your mortgage prior to January 1, 2009.

Home Affordable Modification Program (HAMP)

This program is aimed at borrowers who are undergoing a financial hardship, but are still employed. You must be delinquent or in danger of falling behind in order to justify a modification under this program. Assistance is available for mortgages up to $729,750 if you're seeking assistance for your primary home. You must be able to demonstrate that you have income to support a modified payment. You must also not have been convicted of any felonies related to a mortgage or real estate transaction any time during the last 10 years. To apply for the program, contact your mortgage servicer.

Home Affordable Refinance Program (HARP)

The HARP program is aimed at borrowers who have been unable to refinance using traditional means because the value of their house has declined too much. To qualify for this type of modification, your mortgage must be owned by Fannie Mae or Freddie Mac. You must also be current on your mortgage. A loan-to-value ratio of 80 percent is also required. Contact your servicer to apply.

Principal Reduction Alternative ( PRA)

If you owe more on your mortgage than your house is worth, consider applying for the Principal Reduction Alternative. You must be delinquent or in danger of falling behind due to financial hardship to justify this type of modification. Your mortgage must not be owned by Fannie Mae or Freddie Mac. In addition, your mortgage payment must exceed 31 percent of your monthly income, and you must occupy the home as your primary residence. You must contact your lender to find out if they participate in the PRA program.

Home Affordable Unemployment Modification

This program is especially for borrowers who have lost their job and are eligible for unemployment benefits. This program will lower your payment to 31 percent of your monthly income, or suspend payments for 12 months. You must occupy the home as your primary residence and not previously received a HAMP modification to participate. Fannie Mae and Freddie Mac do not participate in this program, but offer their own unemployment forbearance options.

Other Options

Whether your lender doesn't participate in the program you need or you don't qualify for any of these programs, you might still be able to obtain a modification. Many lenders have their own programs to prevent foreclosure and will share these options with you when you contact them. If you lost your job, undergoing a financial hardship or are paying way more than your home is worth, your situation may warrant a modification.