WASHINGTON (8/27/14)--Starting with mortgages insured by the Federal Housing Administration on Jan. 21, 2015, and beyond, borrowers who prepay their FHA mortgages will not have to make interest payments beyond the date their loan is paid in full.
The FHA approved a rule Tuesday called "Handling Prepayment: Eliminating Post-Payment Interest Charges" (see resource link), and it bans interest charges typically imposed on a borrower who pays off a mortgage ahead of term, sometimes by selling the home or refinancing into another loan with a lower interest rate.
FHA also announced a second new rule intended to ensure borrowers have early access to information when making decisions about their FHA mortgages. It requires that borrowers get at least 60 days--but no more than 120 days--notice before any change is made to their monthly payment for adjustable-rate mortgages(ARMs) that are FHA-insured. It applies to FHA-insured ARMs originated on or after Jan. 10, 2015.
The rule also requires lenders to base an adjustment to the interest rate on the most recent index value available 45 days before the change is set to take place. FHA extended this so-called "look back" period from 30 days.
FHA said in a release that together, the new rules are responsive to the regulations implementing the Truth in Lending Act (Regulation Z) as revised last year by the Consumer Financial Protection Bureau.