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April 2023 » 71 J O U R N A L April 2023 » Advance Efforts to End Homelessness: To prevent and reduce homelessness, the Budget provides $3.7 billion, an increase of $116 million over the 2023 enacted level, for Homeless Assistance Grants to meet renewal needs and expand assistance to approximately 25,000 addi- tional households, including survivors of domestic violence and homeless youth. These targeted resources would support the Administration's recently released Federal Strategic Plan to End Home- lessness. The Budget also provides $505 million for Housing Opportunities for Persons with AIDS, serving a population with a disproportionately high rate of homelessness and providing a critical link to services. Advance Equity by Preventing and Redressing Housing Discrimination: The Budget provides $90 million to support state and local fair housing enforcement organiza- tions and to further education, outreach, and training on rights and responsibilities under Federal fair housing laws. Reduce Costs for New Homeowners and Expand Access to Homeownership: To make homeownership more affordable for under- served borrowers, including first-time, low- to moderate-income and minority homebuyers, the Federal Housing Administration (FHA) is reducing the annual mortgage insurance premiums new borrowers will pay by about one-third. This action, effective in 2023, will save the average FHA borrower approximate- ly $800 in the first year of their mortgage loan. The Budget also includes $100 million for a HOME down payment assistance pilot to expand homeownership opportunities for first-generation and/or low-wealth first-time homebuyers and $15 million to increase the availability of FHA small balance mortgages. Recently, Sen. Sherrod Brown, Chair of the Senate Committee on Banking, Housing, and Urban Affairs, led 17 Senate Committee Chairs and Majority Leader Chuck Schum- er in a letter to President Biden request- ing that the federal government utilize a "whole-of-government" approach to address our nation's housing needs. "Our nation's housing is an essential piece of our infrastructure, but it is a sector that remains in crisis," wrote the Senators in the letter. "With the Bipartisan Infrastructure Law, CHIPS and Science Act, and the Infla- tion Reduction Act, decisive steps have been taken to address many of our nation's infra- structure deficiencies. However, more must be done to address the challenges facing the housing sector, where lagging production coupled with aging housing stock are making housing more expensive and unable to meet the needs of all Americans." HUD EXTENDS LOAN MOD OPTION TO 480 MONTHS T he U.S. Department of Housing & Urban Development (HUD) has published a Final Rule in the Federal Register its intent to increase the maximum allowable term for Federal Housing Administra- tion (FHA)-insured loan modifications from 360 months to 480 months (40 months). The new rule will become effective Monday, May 8, 2023. On April 1, 2022, the FHA published a Proposed Rule in the Federal Register to solicit public comments on a proposal to allow mortgage servicers to provide a stand- alone 40-year loan mod option for struggling homeowners. Increasing the maximum term limit to 480 months will allow mortgagees to further reduce the borrower's monthly payment as the outstanding balance would be spread over a longer time frame, providing more borrowers with FHA-insured mortgages the ability to retain their homes after default. This change will also align FHA with modifi- cations available to borrowers with mortgag- es backed by Fannie Mae and Freddie Mac. This final rule adopts HUD's April 1, 2022, proposed rule without change. "Adding the 40-year loan modification to FHA's loss mitigation toolkit creates better alignment across the government and with Fannie Mae and Freddie Mac, a long-stand- ing MBA priority that we most recently recommended in our new White Paper on the future of loss mitigation," Mortgage Bankers Association (MBA) President and CEO Robert D. Broeksmit, CMB said. "Better alignment will improve consumer experi- ence and lead to consistency and simplicity when addressing adverse market conditions, national emergencies, and natural disasters." Public feedback during the public comment period supported the proposal, stating that a 40-year loan modification option would be a valuable tool, providing significant relief for struggling borrowers. Commenters added that extended maximum loan terms allow lenders to further reduce monthly mortgage payments, thus assist- ing struggling borrowers in retaining their homes and avoiding foreclosure. One of the 20 commenters noted that borrowers who re-default after utilizing other loss mitigation methods (such as a partial claim) have few options for retaining their homes. Com- menters felt that the current 30-year term maximum loan modifications are sometimes insufficient to provide affordable monthly payments for defaulting borrowers. Prior to the Proposed Rule, HUD's regulations allowed mortgagees to modify an FHA-insured mortgage by recasting the total unpaid loan for a term limited to 360 months to cure a borrower's default. Earlier this year, the FHA expanded its loss mitigation options to all eligible borrowers who fell behind on their mortgage payments, regardless of the cause of their delinquency. "We are committed to ensuring that no FHA borrower experiences foreclosure unnecessarily," said Assistant Secretary for Housing and Federal Housing Commis- sioner Julia Gordon earlier this year. "FHA's COVID-19 forbearances and streamlined COVID-19 loss mitigation options have successfully helped millions of struggling borrowers in the last two fiscal years alone. Our actions let us capitalize on what we have learned through the pandemic to continue helping borrowers avoid foreclosure, regard- less of the nature of their hardship." As published in the Federal Register, HUD recognized that, since the Proposed Rule was published last April, interest rates have increased to edge toward the 7% mark. HUD cited that the increase in rates may decrease the effectiveness of a modification in providing significant payment reduction, because the modified loan may be at a higher interest rate than the original loan. HUD believes that this rule will provide a critical home retention tool for borrowers as interest rates change over the long term. "MBA appreciates FHA's engagement with mortgage servicers and other indus-

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