FHA TO ELIMINATE "POST PAYMENT" INTEREST CHARGES
Agency will also ensure borrowers of adjustable-rate mortgages receive earlier notice of rate changes

WASHINGTON - The Federal Housing Administration (FHA) today announced that borrowers who prepay their FHA-insured mortgages will not have to make interest payments beyond the date their mortgage is paid in full. FHA's rule, Handling Prepayments: Eliminating Post-Payment Interest Charges (www.gpo.gov/fdsys/pkg/FR-2014-08-26/pdf/2014-20214.pdf), applies for FHA-insured mortgages closed on or after January 21, 2015. This rule explicitly 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.

In addition, FHA announced a new rule to ensure borrowers have early access to information when making decisions about their FHA mortgages. Effective for FHA-insured Adjustable Rate Mortgages (ARMs) originated on or after January 10, 2015, this rule makes two revisions to FHA's ARM Program. It requires lenders:

• To provide borrowers of FHA-insured ARMs with at least a 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.

Read FHA's rule: Adjustable Rate Mortgage Notification Requirements and Look-back Period for FHA-insured Single Family Mortgages (www.gpo.gov/fdsys/pkg/FR-2014-08-26/pdf/2014-20215.pdf).

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.

###

HUD's mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the need for quality affordable rental homes: utilize housing as a platform for improving quality of life; build inclusive and sustainable communities free from discrimination; and transform the way HUD does business. More information about HUD and its programs is available on the Internet at www.hud.gov and http://espanol.hud.gov. You can also follow HUD on twitter @HUDGov, on facebook at www.facebook.com/HUD, or sign up for news alerts on HUD's Email List.