NAR Calls on FHA to Eliminate
Prepayment Penalty
In light of the Ability-to-Repay Proposed Rule, NAR sent a letter to the Federal Housing Administration asking the agency to remove their prepayment penalty. The proposed rule amends the Federal Reserve’s Regulation Z, the Truth in Lending Act (TILA), to prohibit any creditor from providing a mortgage loan without making a reasonable and good faith determination that the borrower has the ability to repay the loan. As amended, TILA also strictly limits or, in some cases, bars prepayment penalties. Where they are allowed, they must be phased out over three years. NAR submitted comments on the Ability-to-Repay proposed rule on July 22, 2011.
NAR has been urging FHA and Ginnie Mae to remove their prepayment
penalty for more than eight years. No other traditional lending program,
including the Veterans Administration’s Loan Guaranty Program and the
US Department of Agriculture’s Rural Housing Service loans, has such a
requirement. In the last 10 years, FHA borrowers have paid more than
$1.8 billion in excess interest/prepayment penalties. This penalty
places an unreasonable and often unexpected burden on FHA consumers who
already face high housing and closing costs. The mission of the FHA
program is to serve those not fairly served by the private market.
Imposing interest penalties on these consumers contradicts this goal.
Jerome Nagy, 202-383-1233
Megan Booth, 202-383-1222
No comments:
Post a Comment