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Here's what to do if you get behind on mortgage payments - CBS News

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As inflation and interest rates remain elevated this year, some Americans are having trouble keeping up with mortgage payments.

Although the number of U.S. mortgages delinquent for 30 days or more fell slightly to 2.6% in August 2023 from 2.8% at the same time last year, Americans are still facing record high interest rates, according to the most recent figures from CoreLogic.

"U.S. mortgage performance remained strong in August, supported by a robust job market and a healthy economy. However, this thriving job market comes at a time when interest rates are quickly rising," Molly Boesel, principal economist for CoreLogic, said in a report.

The current average interest rate for a 30-year fixed-rate mortgage continues to hover above 8%, the highest it's been since 2000

For homeowners struggling to make their monthly mortgage payments, there are options to protect you from falling too far behind. Here are four tools and tips for mortgage holders in need of assistance. 

Get forbearance

The financial institution that handles your mortgage can grant forbearance, which is a temporary suspension of payments that typically last for three to six months. During the forbearance period, your account is marked as current and paid. Once the forbearance period ends, a homeowner must either repay the missed payments in a lump sum or through an installment payment plan. 

To obtain forbearance, you'll have to prove that you're in financial hardship. Each lender requires different documentation from those applying for forbearance. 

Refinance the loan

Another option for homeowners experiencing financial difficulty is to take out a new mortgage — hopefully at a lower interest rate — and to use the funds generated from a new loan to pay off the pre-existing one. If done correctly, borrowers will walk away with new financing that comes with a lower mortgage payment because the new loan has a lower interest rate. Most mortgage experts, however, don't recommend homeowners use this refinance strategy, unless they can find a new mortgage plan that will reduce their interest rate by at least 1%.

Homeowners should strive to increase their credit score before refinancing, experts said. Many refinancing options require homeowners to pay closing costs typically ranging from 2% to 6% of your loan amount, according to Lending Tree.

Try getting a loan modification

A loan modification enables homeowners to change the terms of their existing home loan rather than taking out a new one. 

Loan modifications usually come in four forms — reduced interest rate, extended loan term, changed loan type (from conventional to adjustable rate, for example) or principal reduction. Any of those forms would result in a lower mortgage payment and, ideally, something more manageable for the homeowner. Borrowers must contact their loan servicer and be able to provide proof of financial hardship to be eligible for this tool. 

Seek government assistance

Homeowners can apply to federal programs designed to help them stay in their homes and keep up with the mortgage. Examples include:

  • The Federal Housing Administration (FHA) loss mitigation programs. The U.S. Department of Housing and Urban Development offers several options for FHA-insured homeowners whose mortgage is either in default or at risk of default. 
  • The U.S. Department of Veteran Affairs (VA) offers financial counselors to military families facing foreclosure. 
  • The Consumer Financial Protection Bureau (CFPB) Homeowner Assistance Fund. This is a federal assistance program for homeowners financially impacted by COVID-19 who need assistance to pay their mortgage or other home expenses.

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