Mortgage

FHA may scuttle ‘antiquated’ mortgage prepayment penalty

Realtors say interest charges are an unfair burden on home sellers

Future-Proof: Navigate Threats, Seize Opportunities at ICNY 2018 | Jan 22-26 at the Marriott Marquis, Times Square, New York

Realtors are cheering a proposal by U.S. Department of Housing and Urban Development to eliminate interest charges imposed after borrowers pay off loans insured by the Federal Housing Administration. Currently, FHA borrowers are charged interest through the end of the month in the month on which they pay off their mortgage. Depending on the payoff date, this forces some borrowers to pay almost an entire month's interest on loans they no longer have, placing "an unreasonable and often unexpected burden on FHA consumers who already face high housing and closing costs," NAR President Steve Brown said in a letter to FHA Commissioner Carol Galante today. When selling their homes, borrowers often have a difficult time selecting their closing date, Brown added. "Even when consumers are aware of the pre-payment penalty, they are on the timetable of the buyer, the settlement company, title company and mortgage lender and cannot always close on the last day of the month," he said. Un...