FHA to eliminate ‘post-payment’ interest charges

WASHINGTON – Sept. 3, 2014 – The U.S. Department of Housing and Urban Development issued a statement recently that Federal Housing Administration (FHA) sellers won’t be charged a full month’s worth of interest if they sell their home early in the month.

In the past, a homeowner who paid off an FHA loan on Sept. 3, for example, could be charged interest on the loan as if he carried it through to Sept. 30 – essentially a fee for borrowing money that he no longer owes.

Until now, many FHA-financed sellers have pushed to close at the end of a month to avoid an unfair interest charge. That may change going forward.

The change aligns FHA’s policy with Fannie Mae and Freddie Mac’s rules and follows guidelines issued by the Consumer Financial Protection Bureau (CFPB). Under the qualified mortgage rule, CFPB considers the full-month interest payment a prepayment penalty that’s no longer permitted.

FHA’s reversal of its post-settlement interest policy “will have a positive impact because it will spread out closings,” noted Washington-based mortgage consultant Brian Chappelle. “It will eliminate the need to schedule closings at the end of the month.”

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Reprinted with permission. All rights reserved. Florida Realtors®

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