Increased 40-Year Term for Loan Modifications

Maria Chelo Manlagnit De Venecia
Janet Li
Alastair McFarlane
U.S. Department of Housing and Urban Development, Office of Policy Development and Research

The views expressed in this article are those of the author and do not represent the official positions or policies of the Office of Policy Development and Research, the U.S. Department of Housing and Urban Development, or the U.S. Government.

On April 1, 2022, the U.S. Department of Housing and Urban Development (HUD) proposed a rule to allow lenders to extend the repayment period of a mortgage loan to 40 years. HUD’s current regulations allow mortgagees to modify a Federal Housing Administration (FHA)-insured mortgage by extending the total unpaid loan for a term limited to 30 years after a borrower’s default. The loan modification is intended to assist borrowers with FHA-insured mortgages who are experiencing financial hardship due to negative life events or economic conditions and whose existing mortgages are in default or imminent default. Being able to offer a longer-term loan eases the burden of loss mitigation on lenders and FHA, and it prevents default, foreclosure, or other negative outcomes for certain borrowers who would not be able to retain their homes without an immediate reduction of their periodic mortgage payment.