Regulatory changes

HUD proposes changes to align TILA, FHA interest rate requirements

HUDThe Department of Housing and Urban Development recently proposed two rule amendments aimed at aligning the Federal Housing Administration’s interest rate and notification rules for single-family mortgages with the CFPB’s Truth in Lending requirements.

Under HUD’s proposal, interest rate adjustments that alter a borrower’s monthly adjustable-rate mortgage payment must be “based on the most recent index value available 45 days before the date of the rate adjustment.”

In establishing its TILA rule, the CFPB set the look-back period to 45 days, saying the FHA’s current 30-day look-back period did not allow the homeowner adequate notice of an interest rate and monthly payment change. The effective date of the 45-day look-back rule is Jan. 10.

“Revising the current 30-day look-back period to 45 days would enable FHA-approved mortgagees to meet the 60- to 120-day notification period prior to any adjustment to a mortgagor’s monthly payment that may occur, as required by the 2013 TILA Servicing Rule,” HUD said in its proposal.

The second proposed amendment would require cross-reference of disclosure and notification requirements and would require the lender of an FHA-insured ARM to provide the homeowner with specific disclosures associated with any interest rate adjustment that will affect a borrower’s monthly payments.

Currently, FHA-approved lenders are required to notify the homeowner at least 25 days before any adjustment occurs and must inform the borrower of the new interest rate, how the adjustment was calculated and the amount of the new monthly payment.

“The mortgagee would be required, the first time the interest rate adjusts the monthly payment of an FHA-insured ARM, to provide the appropriate disclosures to the mortgagor at least 210, but not more than 240, days before the first payment at the adjusted level is due,” the HUD proposal said.

Comments on the HUD proposal are due by June 7.

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