Mortgage subservicing: What is it, and how can it work for my CU?

CUNA strongly supports HUD’s ‘40-year modification’ proposal

May 31, 2022

CUNA strongly supports the Department of Housing and Urban Development’s (HUD) proposal to increase the term limit for modification of Federal Housing Administration (FHA) mortgage loans to 40 years. HUD’s current regulations prescribe FHA loan servicers may modify a loan for a term of no more than 30 years (360 months).

CUNA notes that NCUA allows for 40-year mortgages—or longer—with specific board approval, and the 40-year modified mortgage is already permitted by Fannie Mae and Freddie Mac. The U.S. Department of Agriculture (USDA) allows for certain loan modifications of up to 40 years, and Ginnie Mae has established a pool type to support securitization of modified loans with terms up to 40 years.

“Credit unions report that the increase in the term will be a helpful tool for assisting credit union members struggling to make their mortgage payments and will allow credit unions to extend the same opportunities to modify their mortgage to members who rely on FHA-loans, particularly those who are low-income and first-time homebuyers,” the letter reads.

“In addition to creating parity for credit union members, aligning the term limits for modifications across Fannie Mae, Freddie Mac, USDA, and FHA lending creates operational ease for mortgage servicers,” it adds.

CUNA also notes the increase in maturity term limit will give meaning and effect to Ginnie Mae’s established pool type of loans, which should “help increase available liquidity for FHA lenders working to assist homeowners.”