Even ChatGPT knows there’s no 40 year FHA loan. Sort of.


It’s Financial Literacy Month, so naturally financial misinformation prevails. The big example this week was false information spreading about 40 year FHA loans that don’t exist. As Matt Graham at Mortgage News Daily’s winning headline said: No, There is NOT a New 40yr FHA Loan. There is, however, a new 40 year FHA loan modification for homeowners in hardships who need lower payments. Even ChatGPT knows this. Sort of.

Here’s ChatGPT correctly answering whether there’s a 40-year FHA loan:

ChatGPT correct reply to whether FHA offers a 40-year loan - The Basis Point

But here’s ChatGPT incorrectly answering whether there’s a 40 year FHA loan modification:

ChatGPT incorrect reply to whether FHA offers a 40 year FHA loan modification - The Basis Point

So my first Financial Literacy Month tip is this:

Don’t act on advice from ChatGPT.

It’s a glorified web search.

Only worse because it feels official when it talks to you.

But the official HUD summary on FHA 40 year loan modifications is real, and says this:

HUD’s regulations allow mortgagees to modify a Federal Housing Administration (FHA) insured mortgage by recasting the total unpaid loan for a term limited to 360 months to cure a borrower’s default. This rule amends HUD’s regulation to allow for mortgagees to recast the total unpaid loan for a new term limit of 480 months. 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 modifications available to borrowers with mortgages backed by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), which both currently provide a 40-year loan modification option. This final rule adopts HUD’s April 1, 2022, proposed rule without change.

It goes live May 8, 2023.

So if you’re an FHA borrower facing hardship, ask your lender now.

And my second Financial Literacy Month tip is this:

Don’t act on financial advice from social media either.

News of the “new 40-year FHA loan” which doesn’t exist spread all over TikTok.

Connie Kim at HousingWire gave examples, including this misinformation gem from someone “who claims to be a lawyer.”

“The difference now is, they [the FHA] are making their loan term to 40 years, and that increases your buying power as a purchaser. You can go out and get a bigger house now because you have higher borrower power at 3% down because your loan term has increased to 40 years.”

Thanks to Matt and Connie for patrolling the internet.

And please be careful out there.


No, there is NOT a 40-year FHA loan (MND)

Misinformation about FHA loan modifications spreads on TikTok (HW)

Increased 40-Year Term For FHA Loan Modifications (HUD)

Mortgage payment deferrals that helped 1m+ homeowners keep homes during pandemic now permanent (TBP)

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