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Tuesday, August 26, 2014

HUD Finalizes Changes on FHA-Insured ARMs, Prepayments

The Department of Housing and Urban Development is finalizing changes in how FHA-insured adjustable-rate mortgages are adjusted and eliminated post-payment interest charges on single-family FHA-insured mortgages. The changes are intended to align the FHA’s lender requirements with CFPB rules.

The ARM rule requires a 45-day “look-back” period — that is, the gap between an ARM index calculation and the date the rate adjusts — up from the current 30-day look-back. It also provides for a 60-120 day notice period prior to ARM adjustments, up from the 25 days FHA currently requires. It takes effect for FHA-insured ARMs originated after Jan. 10, 2015.

The second rule, governing prepayments, would allow lenders to charge interest only through the date a mortgage is paid in any given month. It takes effect on Jan. 21, 2015. In a joint comment letter on the proposal, ABA called for further coordination among the FHA, the CFPB and Ginnie Mae to ensure greater consistency in servicing policy.

Read the ARM rule.
Read the prepayment rule.
Read ABA's letter.

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