On April 1, 2022, HUD issued a proposed rule to increase the term for loan modifications to 40 years. HUD's current regulations allow mortgagees to modify a FHA insured mortgage by recasting the total unpaid loan for a term limited to 360 months to cure a borrower's default. This proposed rule would amend HUD's current regulation to allow for mortgagees to recast the total unpaid loan for a new term limit of 480 months.
On April 18, 2022, FHA added a new, 40-year mortgage modification option for mortgage servicers to use in conjunction with its partial claim option to assist additional borrowers who are behind on their mortgage payments for FHA Title II forward mortgages. According to the Federal Housing Administration, the new loss mitigation home retention option is designed to help those borrowers who cannot achieve a minimum targeted 25 percent reduction in the Principal and Interest portion of their mortgage payment through FHA’s existing 30-year mortgage modification with a partial claim.
The 40-year modification with partial claim is now included as a component of FHA’s COVID-19 Recovery Modification. When finalized, the rule will give FHA the authority to add a permanent 40 year term to its loss mitigation options.
Read the FHA’s press release here.
The proposed rule can be found here.
