FHA Tweaks Interest Rate Rules to Align With QM

August 28, 2014
American Banker 
mortgage lending news
Home sellers will be able to close at any time of the month without paying extra interest, under revisions being made to FHA rules.

As it stands now, FHA borrowers who sell or refinance are responsible for a full month's interest payment regardless of when they go to settlement; therefore, most closings are scheduled for the end of the month. The change lines FHA policy up with that of Fannie Mae and Freddie Mac, as well as with the Consumer Financial Protection Bureau. The CFPB classifies post-settlement charges as prepayment penalties, which are not permitted under the qualified mortgage rule.

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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