Financial data from the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, released earlier this month, revealed that household debt balances reached $18.8 trillion in the fourth quarter of 2025. The report stated that borrowers were delinquent on 4.8% of all outstanding US household debt, ranging from mortgage payments to car payments and credit card debt. This rate represented the highest level of delinquency since 2017 and was driven by rising defaults among low-income and young borrowers.
Experts believe that the rise in delinquencies among the lowest earners is evidence of an increasingly bifurcated economy — one that’s booming in some respects, like with the AI boom, while the rest of the economy just isn’t doing much. People who were already affluent are becoming more affluent, while those who are less well-off are under severe pressure.
In short, it’s a great time to be a billionaire (of course), but there are clear signs that middle-to-low income consumers are struggling. One of those signs is the rise in delinquencies in mortgage payments, with New York Fed researchers finding that those delinquencies were often concentrated in lower-income zip codes.
So, what should you do if you, like many people right now, are struggling to make mortgage payments? You do have some mortgage relief and assistance options, but it’s critical to take action before it’s too late and you’re facing foreclosure.
Seek Reinstatement By Paying Your Lender The Entire Past-Due Amount
If you’ve fallen behind on your mortgage payments, talk with your mortgage servicer about an option called “reinstatement.” With reinstatement, you pay the entire past-due amount as a lump sum, as well as any late fees and penalties by an agreed-upon date. It’s a win-win situation if you can do it. Your mortgage loan documents and terms remain in full effect, and your lender gets the payment they’re seeking.
Some people may be eligible for reinstatement assistance through state-run programs often called homeownership assistance funds (or similar names). If you talk with a local housing counselor, they may be able to point you in the right direction and tell you what resources are available in your area.
The U.S. Department of Housing and Urban Development (HUD) oversees federal housing policy and supervises the Federal Housing Administration (FHA) program, alongside entities like Fannie Mae. If you have a government-backed mortgage, HUD guidance often determines what relief options are available to you. There are many HUD-approved housing counseling agencies who can help you with reinstatement or other options.
Create a Repayment Plan
One of those options may be a repayment plan. If you’ve fallen behind on mortgage payments, you could also create a repayment plan with your lender. As part of the repayment plan, your lender will add a portion of the past-due amount to each mortgage payment you make. Over a set period of time, you’ll be caught up. Note that this option works best if you’ve missed only a few payments.
Ask Your Lender for a Loan Modification
Mortgage modification is another option. It’s a process by which homeowners and their lenders agree to change one or more terms of the mortgage contract to make the payments more manageable. The mortgage remains in place, but something changes. This might be a lower interest rate, extending the loan term, lowering the amount of principal paid in each payment, or even adding missed payments to the loan balance.
Your lender may require you to demonstrate financial hardship before agreeing to a mortgage modification. It’s important to pay close attention to the details and to stay in close communication with your lender throughout the process. It’s also important to note that there are mortgage modification scams out there. So be wary, double-check, and document everything you’re told.
Refinance at a Lower Interest Rate
You can also try to work your way into a lower monthly payment by refinancing your home. If you bought a few years ago, or you bought with credit that wasn’t quite spotless, your interest rate could be as much as 6.87%. Interest rates have now dropped as low as 6.09% for a 30-year fixed-rate mortgage (as of February 2026). With that drop, refinancing could save you some money and make the payment more affordable. Although, if you bought during the pandemic and got one of those legendary 2% interest rates, this isn’t the option for you.
Explore Other Options For a Lower Monthly Payment (Which May Help a Bit)
If you’re feeling pinched by your mortgage payment but things aren’t dire yet, you may have a few options to ease the burden before you really fall behind. Remember that there are a few elements that probably make up your mortgage payment. In addition to seeking a lower interest rate on the loan itself, you can also explore making changes to the other things that influence your total monthly payment.
For example, most borrowers put money in escrow to pay property taxes and insurance payments. If your property taxes are lower, or if your homeowner’s insurance costs less, you’ll have to put less money into the escrow account, and it could lower your payment a bit.
- Lower the property taxes you pay: Many states offer some form of property tax relief for primary residences, which is often called a “homestead exemption.” If you live in a state that offers homestead exemptions, make sure that you’ve filed the proper paperwork with your state. Usually, this means filing a one-time application with your local county assessor’s office to qualify. You’d be surprised how many homeowners miss this step and pay extra taxes they don’t need to.
- Lower your homeowner’s insurance rates: You could also shop around for homeowner’s insurance to see if better rates are available to you. It’s not uncommon for different insurers to quote significantly different prices. If you feel financially pinched and are carrying really good insurance, you can explore more mid-range options. But, of course, be wary of the risk you are assuming when you cut corners with insurance. Failing to have insurance in an emergency can be disastrous.
- Eliminate your private mortgage insurance: Speaking of insurance, part of your monthly mortgage payment could also be going to private mortgage insurance (PMI). You might be eligible to have the mortgage insurance removed from the loan, but the path you take may depend on how long you’ve had the loan and how much money you put down. Plus, the mortgage insurance is intended to protect your lender in the event you stop paying. So, if you’ve already stopped paying your mortgage, you’ll want to consider another option first.
No Matter What, Don’t Ignore Your Lender’s Phone Calls
Struggling financially can be terrifying. After a night of sleeplessly staring at the ceiling around 3 a.m., doing mental math that never quite adds up, it can be tempting to let your mortgage lender’s calls go to voicemail. This is a risky step.
The first month you miss a mortgage payment, your lender will contact you by letter or phone. The second month you miss a payment, you’ll likely get repeated calls from your lender. By the third month, you might receive a letter (called a “Demand Letter” or “Notice to Accelerate”) that says you have 30 days to bring the mortgage current. By the fourth month, you’ll be nearing the 30-day mark set out in the Demand Letter. You’ll begin incurring all attorney fees as part of your delinquency. Then a date may be set for a sheriff’s or public trustee’s sale. Before you know it, you’ll face the actual day of foreclosure.
It can happen so quickly — especially if your life is feeling chaotic, or you’re experiencing mental or physical health challenges, navigating an emergency, or experiencing a big life event. But, all along the way, a housing counselor can help you. And, if you stay in contact with your lender and get assistance as early as possible, you’re more likely to get things back on track and keep your home.
Do not feel ashamed. Remember that household debt balances reached $18.8 trillion by the end of last year. Your debt — no matter how impossibly large and unmanageable it feels to you right now — is only the tiniest fraction of that amount. You are not the only one struggling right now. You are not alone.
Related Resources
- Mortgage and Loan Legal Basics (FindLaw's Learn About the Law)
- Foreclosure Frequently Asked Questions (FindLaw's Learn About the Law)
- Alternatives to Foreclosure (FindLaw's Learn About the Law)
