Misinformation is spreadingabout (FHA) recent increase to maximum mortgage modification term, causing confusion for homebuyers.
the fhaa final rule last month that allows mortgagees to increase the maximum FHA-insured home loan term of 360 months to 480 months after a default. That change is scheduled to go into effect on May 8.
While the recent FHA decision only applies to existing mortgages that defaulted, some inaccurate content on TikTok claims that the FHA approved a 40-year home loan program for first-time homebuyers.
“The difference now is that they [the FHA] they are making your loan term 40 years, and that increases your purchasing power as a buyer,” said one user, who claims to be a lawyer, in a recent video. “You can go out and buy a bigger house now because you have more lending power with 3% down because your loan term has increased to 40 years.”
The new FHA regulation is aoption aimed at helping homeowners keep their homes after delinquency by allowing mortgagees to further reduce borrowers’ monthly payment.
A 40-year loan modification can help borrowers avoidspreading the outstanding balance of the mortgage over a longer period. This makes monthly payments more affordable, the FHA said in March.
He(HUD) did not respond to housingwirerequest for comment on the dissemination of inaccurate information about the FHA 40-year loan modification decision prior to publication.
Another video from a TikTok user claiming to be a financial adviser claims that HUD introduced a 40-year FHA mortgage.
“Right now, a 30-year FHA loan for $500,000 at 6.7% interest would cost $3,500 a month. What if we allowed a 40 year option that would only cost $3280 per month saving them $220? said the TikTok user in a video where he plays the role of a HUD official.
But while there is content on TikTok that misrepresents the FHA loan modification announcement, some users have posted videos warning of inaccurate information.
“It is not for new loans (…). The 40-year loan will be for people who already had an FHA loan and show need. [the] they need to modify that loan or make changes to it so they can keep their home and not foreclose,” said one user, who claims to be the originator of the loan.
“This is a perfect example of why you have to be careful with clickbait content,” the user noted.
The FHA final rule also aligns the requirements for the FHA modification option available to– and -backed mortgages, which provide a 40-year loan modification option.
Borrowers who choose a 40-year loan modification would see additional interest payments over the course of the extended term, but HUD noted that the opportunity for borrowers to keep their homes with a more sustainable repayment plan outweighs the drawbacks.
“While rising interest rates may prevent a 40-year loan modification from providing a significant payment reduction, HUD believes that rising interest rates make a 40-year loan modification more critical in Circumstances in which a 30-year loan modification does not sufficiently reduce the monthly payment. to an amount the borrower could pay to keep their home,” HUD said in itsin March.