FHA’s 40 Year Loan Modification is a new mortgage disclosure rule for loan modifications made on or after August 4, 2020. The new program is intended to provide mortgage servicers with the opportunity to offer installment payments to borrowers who may be struggling to make their mortgage payments. The rule enables servicers to extend the term of the loan to 40 years and then adjust the loan payments to help make them more affordable over the life of the loan.

The main goal of the new rule is to alleviate some of the financial burdens associated with long-term mortgage payments. By stretching the life of the loan to 40 years, borrowers will be able to make smaller payments which could ultimately help them avoid foreclosure. This also gives borrowers more tools to stay in their homes, even if they are unable to make their full mortgage payments.

Under the new rule, loan servicers must provide a borrower with a loan modification that must meet certain criteria. The loan modification must lower the monthly payment to the principal, interest, and escrow (if applicable) by at least five percentage points and must meet the requirements of the “ability-to-repay” rule. The new rule will also ensure borrowers are informed of the options available to them to reduce their mortgage payments.

The FHA’s 40 Year Loan Modification program is an important step in helping to reduce the risk of foreclosure and providing borrowers with the opportunity to make lower monthly payments and stay in their homes. The new rule is designed to provide homeowners with options to stay in their homes and is a step towards providing borrowers with the financial tools they need to achieve long-term financial stability.

You can read this full article at: https://www.housingwire.com/articles/fha-publishes-final-rule-on-the-40-year-loan-modification/(subscription required)

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