HUD Releases Proposed Rule Increasing Maximum Term of Loan Modifications to 40 Years | PC Weiner Brodsky Kider

HUD recently released a proposed rule in the Federal Register which would amend 24 CFR § 203.616 to increase the maximum loan modification term from 360 months (30 years) to 480 months (40 years).

HUD first enacted final rules adding loss mitigation options to 24 CFR Part 203 in 1996 and 1997. One of these loss mitigation options allows mortgagees to modify a mortgage and recast the total unpaid amount due for a period not exceeding 360 months from the date of the modification. HUD’s proposed rule would increase that maximum loan modification term to 480 months, thereby spreading the outstanding mortgage balance over a longer period and reducing the borrower’s monthly payment.

The proposed change would align the FHA’s maximum loan modification term with what’s already available to borrowers with mortgages backed by Fannie Mae, Freddie Mac, the National Credit Union Administration and the U.S. Department of Agriculture. Ginnie Mae is also ready to support the change, as the company announced the “creation of a new type of pool to support the securitization of modified loans with tenors up to 40 years” in a Press release June 25, 2021.

Public comments are expected by May 31, 2022.

Luisa D. Fuller