Can a 40-year mortgage save unlucky borrowers? – Daily news


Following the celebration of Independence Day on July 4th this fall, we can add a loan extension of up to 40 years for the category of bankrupt borrowers. Yes indeed.

Jeannie Mae, the main government mortgage financing unit from agencies such as the Federal Housing Administration and the Department of Veterans Affairs, issued a press release on June 25 announcing a 40-year pool of mortgage securitization without any credit limits …

The incredible requirement for this mortgage renewal is that the already modified mortgage “arose from default or reasonably foreseeable default”.

For example, COVID-19 downgrade mortgages may or may not have changed.

Mortgages in COVID-19 abstinence plans approved by the mortgage servicing institution are not considered defaulted in any way, form or form. Currently, unmodified withholding balances are usually carried over to the back of the mortgage, becoming a one-off payment at the end of the 30-year loan term.

“The challenges of the past year require constructive solutions to help people stay in their homes, which was a priority for (US Secretary of Housing and Urban Development Marcia) Fudge,” said Alanna McCargo, senior advisor to Fudge. “As interest rates rise, this 40-year feature will open up more opportunities to cut payments to help homeowners.”

Ginny Mae’s big idea is to help homeowners affected by COVID-19.

OK. But what will the underwriting rules be?

Should a new 40-year mortgage payment with an added cut-off balance be less than it is now? Does an already bankrupt borrower have to prove that the already modified loans are related to COVID-19? Does the borrower need to document, defend, and explain what will change this time to prevent another round of default payments?

Perhaps this is a way to prevent future foreclosures, which could occur years later when the 30-year modified mortgage payment is due. Or maybe it’s a shameless foreclosure booth.

At an interest rate of 3%, the 30-year fixed-rate mortgage of US $ 500,000 provides for principal and interest payments of US $ 2,108.

Assuming 40 years at the same interest rate, the payment would be $ 1,789, which is about 18% less than the payment. Once you start limiting previously unpaid mortgage payments, the monthly savings on monthly mortgage payments diminish quickly.

What investor in their right mind would want to buy a mortgage from a proven pool of insolvent borrowers, likely low net worth, at the same interest rate as the borrower currently? FHA requires a minimum down payment of 3.5% and VA supports loans without a down payment.

Eventually, the CDC postponed the tenant eviction for another month, until July 31st. And borrowers from low-income families with mortgages owned by Fannie-Freddie will have access to lower interest rates and easier terms, according to a June 30 statement from their conservative and regulatory body, the Federal Housing Finance Agency.

When I asked for details, the HUD representative referred me again to Ginny Mae. Ginny Mae’s spokesman Douglas Robinson said, “I can only tell you what is in our press release.”

US Department of Veterans Affairs spokesman Gary Kunich, in particular, said: “VA is aware of the change introduced by Ginny Mae. As soon as the moratorium on divestment and eviction on loans secured by VA ends, VA will provide relevant instructions. ”

40-year mortgages have been around in the regular mortgage world for decades. Today, you can get a 40 year fixed rate mortgage, even for large loans, at just 3.375% with only interest paid for the first 10 years. This applies to purchases and refinancing, but not for modified mortgages in default mode.

Aside from abstaining from COVID-19, what’s the point of harboring homeowners who, for whatever reason, have demonstrated they don’t pay their rent? If non-payment does not entail any consequences, how will it end?

How fair is this to responsible, wealthy tenants trying to break into a home?

What lessons does this teach for the future of home ownership? Does this mean you can keep your home with or without mortgage payments?

Freddie Mac appreciated the news: The 30-year fixed rate averaged 2.98%, down 4 points from last week. The 15-year fixed rate averaged 2.26%, down 8 basis points from last week.

The Mortgage Bankers Association reported a 6.9% decrease in mortgage applications from the previous week.

Bottom line: Assuming that the borrower receives an average 30-year fixed rate on the corresponding loan of $ 548,250, the payment last year was $ 26 more than this week’s $ 2306.

What I see: Locally, highly qualified borrowers can obtain the following fixed rate mortgage loans with a cost of 1 point: 30-year FHA at 2.25%, 15-year conditional at 1.99%, 30-year conditional at 2.625%, 15-year a notional high balance ($ 548,251 to $ 822,375) at 2.125, a 30-year notional high balance at 2.75%, and a 30-year fixed high balance at 2.875%.

Eye-catching Credit of the Week: 15 year flat rate 2.37% at no additional cost.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or His site

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