Answers About the 40-Year Mortgage

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.

How effective have FHA’s loss mitigation home retention options been so far? Data has shown that since January 2021, more than 1.1 million borrowers have exited forbearance, and from January 2021 through February 2022, FHA servicers have completed more than one million COVID-19 loss mitigation or other FHA loss mitigation home retention actions. With this new 40-year mortgage modification option, even more homeowners are expected to benefit.

If you’re a real estate professional or a homeowner who could benefit from this new 40-year mortgage modification option, be sure to reach out, and we can get you started!

U.S. Department of Housing and Urban Development. (2022, April 18). Federal HousingAdministration Adds 40-Year Mortgage Modification with Partial Claim to Home Retention Options for Struggling Borrowers [Press release].