March 09, 2023

FHA to offer NAFCU-supported 40-year mortgage modification

mortgage docThe Department of Housing and Urban Development (HUD) finalized a rule to allow a standalone 40-year loan modification for mortgagees with Federal Housing Administration (FHA)-insured loans to cure a borrower’s default. NAFCU offered support for the rule as it would make homeownership more affordable and support generational wealth building.

The modification would recast mortgagee’s total unpaid loan for a new term limit of 480 months. The rule aligns HUD’s rules with those of the government-sponsored enterprises, the NCUA, the Department of Agriculture, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.

In comments on the proposed rule, NAFCU noted the importance of parity among lenders within the housing finance system and that longer term options would not affect safety or soundness. The association also indicated this modification would incentivize more credit unions to become FHA lenders, providing their members with more options for mortgage lending.

The rule was finalized without changes from the proposal. It takes effect May 8.