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Ginnie Mae Unveils a 40-Year Mortgage

If the only way to buy a home was to pay upfront using cash, there would be very few homeowners. Most of us cannot afford to spend hundreds of thousands of dollars on a single purchase at one time. Thanks to mortgages, we have the ability to own a home and to pay off the cost of that home over long periods of time. This makes the cost of homeownership manageable and affordable. Typically, we are used to seeing 15-year mortgages or even 30-year mortgages. However, there is also such a thing as a 40-year mortgage. While the length of a mortgage is less common, they are available through some lenders. As of this week, they might become more common. Ginnie Mae just announced that they are going to offer 40-year mortgages. What do these programs look like and who are they for? 

Why is Ginnie Mae Introducing a 40-Year Mortgage?

Ginnie Mae’s announcement was made after President Biden appointed Julia Gordon to be the commissioner of the Department of Housing and Urban Development. In this role, Gordon would also be in charge of the Federal Housing Authority. At the same time, President Biden has made other moves to shape up who is in charge of federal housing policy. He removed Mark Calabria who was acting as the director of the Federal Housing Finance Agency. Additionally, he appointed David Uejio as the assistant secretary of Housing and Urban Development. This flury of moves indicates that big changes are afoot in regards to the federal government’s response to housing and the addition of 40-year mortgages is a part of it. 

Many speculate that Ginnie Mae’s addition of the 40-year mortgage and some of hte other moves by President Biden are in response to the pandemic. Millions of homeowners fell behind on rent or mortgages due to lockdowns. Even though we seem to be over the worst part of the pandemic, millions still have not caught up on their payments. These moves seem to be about finding new ways of helping struggling homeowners, as well as renters who want to be homeowners. 

The introduction of the 40-year mortgage is designed to give issuers more flexibility in setting prices for mortgage products. Specifically, this allows them to provide home loans at lower monthly payments to those who qualify. Right now, it seems as if they are particularly interested in providing the 40-year mortgages to individuals who currently have a shorter-term mortgage. This program would allow them to accept the new 40-year mortgage to replace their home loan, which allows them to reduce monthly payments. It seems as if they are attempting to find ways of reducing monthly payments so that existing homeowners can catch up on payments they have missed. Making monthly payments more affordable should theoretically prevent more individuals from defaulting on their mortgages. 

Who Benefits from the Ginnie Mae 40-Year Mortgage? 

The move to a 40-year mortgage is part of a broader shakeup of federal housing policy. As is the case, it might take some time before we have a clear picture of everything in store and who all will be impacted. For now, we can speculate. Ginnie Mae is a federally owned company that provides mortgages for federal government programs. As such, there is a strong possibility that these 40-year mortgages will be offered as options to those who would qualify for other federal government mortgage programs. This would include FHA loans, VA loans, and possibly even USDA loans. To be honest, more details are needed before we can make definitive statements for who will benefit from these programs. What is clear is that the federal government believes bold moves are necessary to try and ensure that everyone has the opportunity to be a homeowner.

Final Thoughts

The addition of the 40-year mortgage to Ginnie Mae’s offerings might be a great opportunity for individuals who already have FHA loans or VA loans and are falling behind. These moves seem to forecast that the federal government is more interested in finding ways for existing homeowners to remain homeowners than pursuing foreclosure. Overall, whether or not you qualify for one of these home loans, this seems to be good news for homeowners and home buyers. It demonstrates a commitment to avoid a wave of foreclosures from millions of Americans falling behind on their mortgages. It also seems to demonstrate a willingness to look for creative ways for renters to become homeowners. Either way, this is an important development that the team at Peoples Choice Mortgage will monitor closely.