There seems to be a lot of misunderstanding regarding the new FHA 40-Year loan program and who could actually benefit from this. Long story short… this is NOT for ALL FHA mortgage loans and ONLY for modifications at this time. The FHA has added this option to assist borrowers who cannot achieve a minimum 25% reduction in the Principal and Interest portion of their mortgage payment through their existing 30-year mortgage modification with a partial claim. This new option is aimed at helping those who are struggling the most to keep their homes during these challenging times.

According to Lopa P. Kolluri, Principal Deputy Assistant Secretary for Housing and the Federal Housing Administration, this new 40-year modification with partial claim is a reaffirmation of their long-term commitment to help as many struggling homeowners as possible. It’s important to note that this new option is consistent with 40-year modification options provided by other mortgage industry participants. Mortgage servicers can start implementing this new option immediately. However, they must start offering this solution to eligible borrowers with FHA-insured Title II forward mortgages within 90 calendar days, except for those funded through Mortgage Revenue Bonds under certain circumstances.