FHA proposal for standalone 40-year mod option

On April 1, 2022, the Department of Housing and Urban Development's Office of Housing published at 87 FR 19037 a proposed rule that would amend HUD's current regulation to allow for mortgagees to modify a Federal Housing Administration (FHA) insured mortgage by recasting the total unpaid loan for a new term limit of 480 months (an increase from 360 months). Increasing the maximum term limit to 480 months would allow mortgagees to further reduce the borrower's monthly payment as the outstanding balance would be spread over a longer time frame, providing more borrowers with FHA-insured mortgages the ability to retain their homes after default. This change would also align FHA with modifications available to borrowers with mortgages backed by Fannie Mae and Freddie Mac, which both currently provide a 40-year loan modification option.

Comments on the proposal are due by May 31, 2022.