A 40-year loan mandates a lot of interest payments and a slow build for equity, but FHA says it will prevent thousands of foreclosures, making that a fair tradeoff.

The Federal Housing Administration (FHA) introduced a 40-year loan modification option, and it’s asking the mortgage industry for input in a bid to expand its COVID-19 loss mitigation “waterfall.”

The proposed rule would revise repayment provisions for FHA borrowers and allow lenders to reframe a borrower’s total unpaid loan for an additional 120 months.

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