FHA FINALLY Ending Prepayment Penalty
Need to cut out of your FHA home loan early than you expected due to job relocation, buying a new home, or other unforeseen circumstances? You'll be happy to know that the Federal Housing Administration is finally ending their prepayment penalty. That's right; the FHA is expected to end one of its most controversial practices. For years, the FHA has been charging borrowers interest on their home mortgages for weeks after they've paid off the entire principal balance. In some cases, their long standing policy had them collecting up to a full month's worth of interest depending on a home owners pay off time which would cost hundreds of extra dollars.
The National Association of Realtors (NAR) estimated that during one year alone - 2003 - FHA collected $587 million in "excess interest fees." So if you paid off your loan on January 1st, the FHA typically demanded interest charges on your mortgages through January 31st. But under the Consumer Financial Protection Bureau's "qualified mortgage" rules, charging interest after a principal balance payoff "is the functional equivalent of a prepayment penalty," according to the bureau.
Now, after decades of criticism, news that the FHA is finally ending the prepayment penalty has been widely reported. It's a move that multiple realty groups have been seeking for some time because it will relieve borrowers of an unexpected financial expense. The change will also align the FHA's policies with the qualified mortgage rule (QRM), which defines what the federal government considers a safe home mortgage loan.
Once the change takes effect, on January 21, 2015, lenders will no longer be able to apply that interest charge to the borrower. In the meantime, if you are closing on a home prior to this policy change Tucson property managers recommend trying to schedule an early payoff or closing on a refinancing as late in the month as possible to avoid those punitive interest charges.
If you'd like more information about the new FHA prepayment penalty policy changes, find out more about qualifying for a loan, or rent a Tucson property management home, please contact the Simply Property Management-Paielli Realty, Inc. team today. – Greg
Simply Property Management – Paielli Realty, Inc.
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