News that FHA willÃ‚Â eliminate a prepayment penaltyÃ‚Â starting next year has been widely reported. ItÃ¢â‚¬â„¢s a moveÃ‚Â NAR has been seekingÃ‚Â for some time because it will relieve borrowers of a financial hit thatÃ¢â‚¬â„¢s entirely out of their control and also bring the agencyÃ¢â‚¬â„¢s policies in line with other federal agencies that backstop mortgages. Perhaps most importantly, it will align the agencyÃ¢â‚¬â„¢s policies with the qualified mortgage rule (QRM), which defines what the federal government considers a safe home mortgage loan.
WhatÃ¢â‚¬â„¢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 FHAÃ¢â‚¬â„¢s policies on condominium financing. ItÃ¢â‚¬â„¢s too difficult for many condo projects to get the stamp of approval thatÃ¢â‚¬â„¢s needed for people who want to buy a unit in the project to get FHA financing.
Seven Gables Real Estate
5481 E Santa Ana Canyon Road
Anaheim Hills, CA 92807