The Federal Government’s Steps to Help Homeowners Avoid Foreclosure

The federal government announced several programs over the last few years to help homeowners in need of assistance avoid foreclosure. These programs strive to help responsible homeowners who are having difficulty paying their mortgage.

The HOPE NOW Alliance tries to help subprime borrowers who can afford the starter rate on a subprime loan but will not be able to make the higher payments once the interest rate goes up. Additional information on this program is available through the Homeownership Preservation Foundation.

The Mortgage Forgiveness Debt Relief Act creates a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. If your mortgage company forgave part or all of your debt between 2007 and 2012, you may be able to claim special tax relief by filling out Form 982 - Reduction of Tax Attributes Due to Discharge of Indebtedness (PDF document) and attaching it to your federal income tax return.

Project Lifeline (PDF document) allows qualified homeowners who are at least 90 days late on their mortgage payments to “pause” the foreclosure process for 30 days. Subprime, Alt-A, and prime loans may qualify for this program, including second liens and home equity loans.