THE FEDERAL HOUSING ADMINISTRATION ANNOUNCES NEW RULES

FHA-insured mortgagesWashington – The Federal Housing Administration (FHA) announced the passing of new rules for FHA-insured mortgages which become effective in January 2015. The revised rules affect interest prepayment on FHA insured loans and for the advanced notice of adjustments on Adjustable Rate Mortgages (ARMs).

In HUD’s bulletin, released August 26, FHA states:  . . . “Borrowers who prepay their FHA-insured mortgages will not have to make interest payments beyond the date their mortgage is paid in full.” The rule prohibits lenders from charging borrowers post-settlement [interest] which is broadly defined as a “prepayment penalty” by the Consumer Financial Protection Bureau (CFPB), for all FHA Single Family Mortgage products and programs. The revised rule applies to FHA-insured mortgages that close on or after January 21, 2015.

Additional rules that were revised, apply to ARMS originated on or after January 10, 2015, which requires lenders to:

  • Provide borrowers of FHA-insured ARMS with at least 60-day, but no more than 120-day, advance notice of an adjustment to their monthly payment. FHA currently requires a 25-day advance notice.
  • To base an interest rate adjustment that results in a corresponding change to the borrower’s monthly payment on the most recent index value available 45 days before the date of the rate adjustment (commonly referred to as a “look back period”). FHA currently requires a 30-day look-back period.

“Together, these new rules are responsive to the regulations implementing the Truth-In-Lending Act (Regulation Z) as revised last year by the CFPB. These policies provide consistent protections for borrowers with FHA-insured mortgages while ensuring borrowers have early access to information when making decisions about their FHA mortgages.”

Read the final rule: http://www.gpo.gov/fdsys/pkg/FR-2014-08-26/pdf/2014-20215.pdf or
HUD No. 14-104: http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2014/HUDNo_14-104
Additional Resources: Elimination of FHA “Prepayment Penalty”

 

Tags: