What Is a Flex Mortgage Loan?

The term “flex mortgage loan” refers to a home loan that has flexible payment terms. Prior to the housing crisis, flexible mortgage loans were commonplace, but the Consumer Financial Protection Bureau eliminated them entirely in 2014. A flexible mortgage loan was a type of loan that allowed consumers to get into a home at a fixed rate, with that extra interest added to the balance of the loan in a practice known as negative amortization.


  • Eliminated in 2014, a flex mortgage loan helped borrowers get into a home by offering the option to pay interest only or a minimum amount each month until they reached a certain percentage of their original loan amount.

Flex Mortgage Loan Definition

Also called a Flexible Payment Adjustable-Rate Mortgage, a flex mortgage gave borrowers four loan choices:

  • 30 years with full amortization
  • 15 years with full amortization
  • Interest-only payments
  • Minimum monthly payments

Borrowers were drawn to the low introductory interest rates offered with mortgageflex programs, often as low as 1 percent. This introductory rate usually lasted about a month, at which point the interest was bumped up. At 1 percent, they might have been able to afford the payment, but once the next bill came in, they realized they couldn’t, at which point they opted to either pay the minimum payment or interest only.

The Problem With Flex Loans

Unfortunately, flexible mortgage loans came with plenty of terms and conditions, which were easy to miss in the stacks of paperwork involved in financing a house. Despite the fact that at the time it technically was legal, the Consumer Financial Protection Bureau knew these programs were problematic, which is why it put in place qualified mortgage protection that would keep consumers safe from these programs.

The biggest issue with mortgageflex programs was that they came with a cap on how long the borrower could only make minimum payments or interest. Once the loan reached 100 to 110 percent of the original amount, that privilege was revoked. Those minimum payments also increased every year, making the loan more expensive with each passing month.

What Is Qualified Mortgage Protection?

Qualified mortgage protection was enacted in 2014 to incentivize lenders to make sure consumers knew exactly what they were getting into with home loans. Instead of drawing borrowers in with low interest rates under flex mortgages they couldn’t afford, lenders had to document that with each loan, they met four criteria, at a minimum:

  • Ability to repay. Lenders must fully document a person’s income, employment situation, assets, credit and monthly debts before approving a loan.
  • No risky mortgages, including loans with balloon payments or negative amortization.
  • A fee cap of 3 percent on any loan that exceeds $100,000.
  • A limit on the percentage of a person’s income that can go toward his debts, including his mortgage payment.

What Is a Flex Modification?

Now that traditional flex mortgages are no longer a thing, the term “flex mortgage” may be used to refer to the Flex Modification Program available to those who have Fannie Mae and Freddie Mac loans. This program can potentially save you approximately 20 percent on your loan.

The mortgageflex option is extended to borrowers who are more than 90 days, but not yet 105 days, behind. If a lender hasn’t offered the option to you and you aren’t yet in foreclosure, you can always apply. Even if you don’t qualify for this program, though, it’s well worth checking with your lender to see if there is a modification program that will help lower your payments. Loan forbearance agreements and repayment plans are two that can help if you find you can no longer afford your monthly payment.