No Prepayment Penalties on Any FHA-Insured Mortgages.

“The Handling Prepayments: Eliminating Post-Payment Interest Charges” final rule revises FHA regulations to prohibit an FHA-approved mortgagee from charging the borrower interest through the end of the month when the mortgage is paid in full before month end, and prohibits prepayment penalties for all FHA-insured single family mortgage products and programs, even if the product or program could fit into one of the circumstances where Consumer Financial Protection Bureau’s rules allow a limited prepayment penalty.

FHA’s final rule adopts the policies published in HUD’s March 13, 2014 proposed rule on this topic without change, including: Notwithstanding the terms of the mortgage, mortgagees shall accept a prepayment at any time and in any amount, and shall not charge a post-payment charge; and Monthly interest on the debt must be calculated on the actual unpaid principal balance of the mortgage as of the date the prepayment is received and not as of the next installment due date.

Finalized rule: Federal Housing Administration (FHA): Handling Prepayments: Eliminating Post-Payment Interest Charges 24 CFR Part 203 [Docket No. FR–5360–F–02] This final rule pertains to all FHA-insured mortgages closed on or after January 21, 2015, regardless of the actual terms of the mortgage.

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