The emergency mortgage assistance programs works by providing homeowners who have suddenly lost their main source of income with relief in making payments on mortgages they've fallen behind on, Nolo explains. The program also pays a portion of the homeowner's mortgage payments for up to 24 months. The homeowner is required to make monthly contributions to his mortgage payment as well.
Once the homeowner is approved for assistance, HUD makes the emergency payments directly to the mortgage lender, Nolo says. The homeowner must contributed 31 percent of his monthly income toward his payment, and the emergency assistance program covers the rest of the payment.
The homeowner may not have to pay back the money if he meets certain conditions. This loan is a forgivable loan with zero percent interest. A five-year principal reduction period is attached, and during that time, the homeowner does not need to make payments on the emergency loan, and the principal is reduced by 20 percent of the original loan each year, Nolo explains. However, the homeowner must remain current on the mortgage payment and remain in the home. If the homeowner meets those conditions, the outstanding balance of the emergency loan is reduced to $0 in five years after the assistance ends. If the homeowner falls behind or sells the home, he must pay the remaining balance on the emergency loan.