FHA Proposes Rule Introducing 40-year Loan Modification Option
On April 1, the Federal Housing Administration (FHA) proposed a new rule introducing a 40-year loan modification option. The FHA believes that extending the loan term limit from 360 to 480 months will help borrowers avoid foreclosure by spreading the outstanding mortgage balance over a longer period and making their monthly mortgage payments more affordable. The proposed rule will specifically benefit FHA borrowers who recently exited government-mandated forbearance but are struggling to make their mortgage payments because of COVID-19 related financial hardships. The Department of Housing and Urban Development in a statement stated that this option could prevent “several thousand borrowers a year from foreclosure.” The FHA is seeking public comments on its proposal which are due by May 31, 2022. Read more.