For years, the FHA
has allowed lenders to charge borrowers a full month of interest when homes were sold or refinanced – eve3n when borrowers paid off their mortgages weeks before the end of the month. That policy has changed, according to a Washington Post report, and the practices of charging extra interest on FHA-insured loans will soon be banned.
Under the rules followed by Fannie Mae, Freddie Mac and the Department of Veterans Affairs, if you closed on a loan at the beginning of the month, your interest charges couldn’t extend beyond the date of closing, according to the Post. But under the FHA’s policy, lenders could charge interest all the way through the last day of the month.
The Consumer Financial Protection Bureau had questioned whether the policy was in the best interest of borrowers, and housing industry pros didn’t think much of it either. National Association of Realtors President Steve Brown told the post that the policy change was “long overdue” and would “result in cost savings for millions of Americans who rely on FHA-insured loans to purchase their homes.”
The new policy will take effect Jan. 21.
A new policy switch by the Federal Housing Administration means America’s homeowners will be saving hundreds of millions of dollars.