About That FHA Prepayment Penalty . . .

News that FHA will eliminate a prepayment penalty starting next year has been widely reported. It’s a move NAR has been seeking for some time because it will relieve borrowers of a financial hit that’s entirely out of their control and also bring the agency’s policies in line with other federal agencies that backstop mortgages. Perhaps most importantly, it will align the agency’s policies with the qualified mortgage rule (QRM), which defines what the federal government considers a safe home mortgage loan.

What’s being eliminated is an interest-rate charge. For FHA borrowers that pay off their mortgage before the end of the month, the lender is allowed to charge to the borrower the interest rate costs on the loan from the day the loan is retired until the last day of the month. So, if a borrower paid off the loan on Sept. 10, the penalty would be 20 days of interest payments. That can be hundreds of dollars. Once the change takes effect, on Jan. 21, 2015, lenders will no longer be able to apply that interest charge to the borrower.

NAR continues to work with FHA on other matters. A big point right now is getting some improvement in FHA’s policies on condominium financing. It’s too difficult for many condo projects to get the stamp of approval that’s needed for people who want to buy a unit in the project to get FHA financing.

In any case, you can learn more about what NAR is doing on FHA and in other legislative, regulatory, and legal areas in the latest video in The Voice for Real Estate news series.

The Voice for Real Estate comes out twice a month to provide a quick look at the top national developments in real estate:

VRE 7 image7: Debt Cancellation, FHA Prepayment Penalty

VRE 6 image6: HUD-NAR webcast, commercial outlook

VRE5 image5: HUD-1 Changes, Antitrust Risks

VRE4 image4: Env. Summit, Flood Ins.

VRE3-still3: White House Meeting, Drones

vre2thumb2: Web Accessibility, FHA HAWK

VRE logo 1: RESPA, Student Debt, Net Neutrality

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Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

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  1. David Schenck

    Now if they could get FHA to stop Raping borrowers with what should be illegal mtg insurance rates!

  2. David Schenck

    On a $200,000 loan, a borrower will pay nearly $90,000 for mtg. insurance over the 30 year loan. Even when the borrower has 95% equity in the home, they will be paying over $230 a month for mtg. insurance. Does that sound like it’s helping middle income Americans be more
    able to afford to own a home?