The American Bankers Association last week expressed support for the Department of Housing and Urban Development’s proposed rule to amend the Federal Housing Administration’s current regulation to allow for mortgagees to provide a standalone 40-year loan modification.
“ABA strongly supports this proposal and believes that allowing servicers to further reduce FHA-insured borrowers’ monthly payments for loans by recasting the unpaid principal balance for up to 40 years will help improve these borrowers’ ability to maintain their home,” the association wrote. “A longer recast of amortization terms should provide a significant reduction in the borrowers’ monthly payment as the outstanding balance would be spread over a longer period. By significantly lowering the monthly payments for the borrower, more homeowners would have the ability to retain their homes after default following periods of hardship. This change should also help mitigate foreclosure for many FHA-insured borrowers.”
ABA noted that the proposed rule permits FHA to offer modifications comparable to those available to borrowers with mortgages backed by Fannie Mae, Freddie Mac and others if certain conditions are met.