Misinformation about FHA mortgage modification spreads on TikTok

Misinformation is spreading on TikTok concerning the Federal Housing Administration‘s (FHA) latest enhance to the utmost mortgage modification time period, inflicting confusion for homebuyers. 

The FHA introduced a closing rule final month that permits mortgagees to extend the utmost FHA-insured mortgage mortgage modification time period from 360 months to 480 months following a default. That change is slated to enter impact on Might 8.

Whereas the FHA’s latest choice solely applies to present mortgages that defaulted, some inaccurate TikTok content material claims that the FHA permitted a 40-year mortgage mortgage program for first-time residence patrons.

“The distinction now could be, they [the FHA] are making their mortgage time period to 40 years, and that will increase your shopping for energy as a purchaser,” one consumer, who claims to be a lawyer, stated in a latest video. “You possibly can exit and get a much bigger home now as a result of you may have larger borrower energy at 3% down as a result of your mortgage time period has elevated to 40 years.”

The brand new FHA regulation is a loss mitigation choice geared towards serving to householders retain their properties after defaulting by permitting mortgagees to additional scale back the month-to-month fee for debtors.

The 40-year mortgage modification can help debtors in avoiding foreclosures by spreading the excellent mortgage stability out over an extended interval. This makes the month-to-month funds extra reasonably priced, the FHA stated in March. 

The Division of Housing and City Growth (HUD) didn’t reply to HousingWire’s request for touch upon the unfold of inaccurate info on the FHA’s 40-year mortgage modification choice previous to publishing. 

One other video from a TikTok consumer who claims to be a monetary advisor states that HUD launched a 40-year FHA mortgage.

“Proper now, a 30-year FHA mortgage for $500,000 at 6.7% curiosity would price $3,500 a month. What if we allowed a 40 yr choice that will solely be $3280 a month saving them $220?” the TikTok consumer stated in a video the place he performs a job of a HUD official.

However whereas there’s content material on TikTok that misrepresents the FHA’s mortgage modification announcement, some customers have uploaded movies that warn about inaccurate info. 

“It’s not for brand new loans (…). The 40-year mortgage goes to be for individuals who already had an FHA mortgage and show they’ve want [the] want to change that mortgage or make modifications to it to allow them to hold their residence and never foreclose,” a consumer, who claims to be mortgage originator, stated. 

“It is a excellent instance of why it’s important to watch out of clickbait content material,” the consumer famous.

The FHA’s closing rule additionally aligns the FHA modification choice necessities obtainable for Fannie Mae– and Freddie Mac-backed mortgages, each of which give a 40-year mortgage modification choice. 

Debtors who select a 40-year mortgage modification would see extra curiosity funds over the course of the prolonged time period, however HUD famous that the chance for debtors to retain their properties with a extra sustainable fee plan outweighs the drawbacks.

“Whereas rising rates of interest might hold the 40-year mortgage modification from offering important fee discount, HUD believes that rising rates of interest make the 40-year mortgage modification extra important in circumstances the place the 30-year mortgage modification doesn’t sufficiently lower the month-to-month fee to an quantity that the borrower might afford to retain their residence,” the HUD stated in its final ruling in March.