:60 Second Sundays: FHA 40 Year Loan Modification

Описание: The Federal Housing Administration (FHA) is working to expand the COVID-19 loss mitigation program to include the option of a 40-year loan modification with a partial claim, an acknowledgement that some borrowers exiting forbearance are still facing financial challenges.
Julienne Joseph, deputy assistant secretary in the Office of Single-Family Housing for FHA at the U.S. Department of Housing and Urban Development (HUD), said that the government agency is “almost there” and “getting warmer” in offering the option to borrowers.  
“As far as the 40-year-old partial claim, I would say probably in the next 60 days we’ll be hearing more about what we can do there,” Joseph said Wednesday at the MBA’s Servicing Solutions Conference & Expo 2022 in Orlando, Florida.
She added: “Of course, we feel time is of the essence, especially because the national emergency has been extended.” On Feb. 18, President Biden extended the national emergency declaration for the COVID-19 pandemic beyond March 1.
HUD did not immediately return a request seeking additional information on its plans. 
In September, the FHA posted a draft mortgage letter proposing a 40-year loan modification combined with a partial claim. The goal is to help borrowers reach the targeted reduction of 25% of the monthly principal and interest portion of their mortgage payments.  

Other government entities, such as Fannie Mae and Freddie Mac, already provide a 40-year loan modification term. According to the HUD website, its loan modification option extends the term of the mortgage to 360 months at a fixed interest rate. 
The partial claim, however, allows arrearages to be placed in a zero-interest subordinate lien against the property to be paid after the last mortgage payment, if the loan is refinanced or the property is sold, whichever occurs first.
The 40-year loan modification with partial claim combines both options. “It is for those who are obviously struggling the most. They may have gone back to work, but their incomes are lower than pre-pandemic,” a mortgage lobbyist who participated in the discussions with the FHA told HousingWire.
According to the latest MBA data, 650,000 homeowners were in forbearance plans as of January 31. Forborne loans in the Ginnie Mae portfolio decreased three basis points from December to January, to 1.60% of servicers’ portfolio volume.


During the last 19 months, MBA’s data revealed that 29.1% of the total forbearance exits resulted in a loan deferral or partial claim. About 19% of those borrowers continued to pay during the forbearance period. However, 17% were borrowers who did not make their monthly payments and did not have a loss mitigation plan. 

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