The Most Important Thing to Know About FHA’s “40-Year Mortgage”

Did you do a happy dance when you read the headlines about the FHA coming up with a 40-year mortgage? Me too.

Until I actually read beyond the headlines.

It’s not a new home loan product on offer, and the operative word in its name that people seem to be missing is “modification.”

Let’s dive into what the FHA is actually offering because it’s not what the media are saying it is.

It’s a mortgage MODIFICATION

“As of May 8, homeowners straining to pay their Federal Housing Administration (FHA) mortgages have another lifeline: the 40-year mortgage modification,” explains Natalie Campisi at Forbes.com.

The program aims to reduce the borrower’s mortgage payment by at least 25%. But, with rising mortgage rates, financial experts caution their clients not to get too excited about the program.

Even “… HUD acknowledges the effect is blunted as interest rates remain high,” according to Campisi.

If you have clients interested in this loan modification, urge them to call their servicer. Their situation will then be evaluated for whichever program fits.

Sadly, too many journalists missed the word “modification” when reading the press releases for HUD’s 40-year mortgage modification program. Homebuyers nationwide are now excited about getting a lower house payment if they can get an “FHA 40-year mortgage.”

As usual, it’s up to real estate agents and loan folks to clean up the mess and set consumers straight.

The best way to get the word out? Through your newsletter, blog posts, direct mail, and social media posts. 

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