Mortgage rates didn't do much today (the average lender drifted microscopically, and Wednesday's CPI data has infinitely more power to move the needle anyway) so let's take our time to focus on something that's actually interesting and oh-so-timely.

The Rumor:

FHA announced a new 40 year loan

The Reality:

FHA announced a LOAN MODIFICATION OPTION that has a 40yr repayment term

For those who already understand the difference between a loan modification and a new loan option, you're free to go and have a great day.   Everyone else won't need to spend more than a few sentences to get up to speed.

A loan modification is a program offered by lenders designed to avoid more dire outcomes when a borrower is struggling to make timely mortgage payments (i.e. foreclosure, short sale, etc).  

How did this rumor get started?  Reporters misinterpreted the initial news because, unlike everyone who's read this far in this article, they either didn't know what a loan modification was or they somehow missed that this news applied only to loan modifications.  

Despite the source material coming out over a month ago, the rumor seems to have gained critical mass just this week based on the uptick in questions and comments we're seeing.  Now that you know the truth, don't be shy about forwarding this article if you see the rumor being perpetuated.  

For those that want to look like they figured this out on their own, you could simply use the following script and pretend like you wrote it yourself:

Hi <insert name of the rumor mongering scoundrel here>,

It looks like that FHA news actually only pertains to loan modifications, and is not a new FHA mortgage option, per .


<insert your name>