The Federal Housing Administration, under the Department of Housing and Urban Development, late last week, published a rule that will expand the COVID-19 mitigation loss of the Department. This 40-year loan modification option will comprehensively change the repayment provisions for FHA borrowers.
This rule will allow lenders to amend the FHA borrowers’ payback requirements, allowing them to recast a borrower’s total outstanding loan for an extra 120 months. The Housing Department made it known that this regulation could avoid several thousands of borrowers from foreclosure on their assets a year.
According to the Department, lenders need to be aware that borrowers will now have more sustainable monthly payments if the recast mortgage is extended from 360 to 480 months. Also, according to the new rule, a lower monthly payment will help borrowers bring their mortgage current, avoid impending re-default, and, of course, keep their homes.
Although, stakeholders in the mortgage and lending industry generally have requested more time from the Department to adjust to the new regulation. As such, a request has been made to the Department for a delay in the implementation of the regulation and a 90-day window for lenders to start offering the loan modification. In addition, a letter from the Mortgage Bankers Association to the FHA states that the pressure on loan originators to implement several policy changes over the past months has been immense and challenging.
If enacted, the rule will bring the FHA in line with other government institutions that already offer a 40-year loan modification period, such as Fannie Mae, Freddie Mac, and the US Department of Agriculture. To read more on this recent regulation and be kept abreast as a lender, click here.
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