FHA may nix ‘antiquated’ mortgage prepayment penalty
WASHINGTON – May 8, 2014 – The Department of Housing and Urban Development (HUD) may ditch a policy that charges interest on Federal Housing Administration (FHA) mortgages through the end of the month in which they're paid off. It's a move the Realtor community encourages.
Because home sellers must consider the buyer's needs, the settlement company, title firm and lender schedules, they often can't close on the last day of the month. And if they don't, they end up paying interest on a loan that they no longer have.
The result, according to a letter to FHA Commissioner Carol Galante from National Association of Realtors President Steve Brown, is "an unreasonable and often unexpected burden on FHA consumers who already face high housing and closing costs."
Under the proposed rule change, lenders could charge interest only through the date the mortgage is paid off. That would bring the FHA into compliance with the federal "qualified mortgage" definition, which bans prepayment penalties. Those standards took effect at the beginning of the year, but the Consumer Financial Protection Bureau (CFPB) has given FHA extra time to adjust.
Post-payment interest on loans closed on or after Jan. 21 of next year, CFPB has warned, will constitute a prepayment penalty.
Source: Inman News (05/07/14)© Copyright 2014 INFORMATION, INC. Bethesda, MD (301) 215-4688