July 6, 2015
Since we got a recent reader question about the rules and regulations about FHA loan interest rate locks, it seemed like a good time to review the FHA mortgage loan rules that govern them.
At the time of this writing, the FHA and HUD are getting ready to transition to a new volume of rules covering FHA Single Family mortgage loan transactions, HUD 4001.1. Until the effective date in September 2015, the previously used references are valid.
In general many of the single family loan rules may be the same, but there have been plenty of changes and updates to certain policies. The information below is still valid at the time of this writing.
FHA loan rules state, “Under all currently active FHA single family mortgage insurance programs, the borrower and the lender negotiate the interest rate and any discount points.” When the borrower and lender agree on a rate and commit to the interest rate lock, FHA loan rules permit the lender to charge a fee for this service in exchange for a commitment to the specific interest rate agreed upon. This commitment must be in writing.
Once signed, the borrower and lender have agreed to “lock in” an interest rate on the FHA loan, protecting the borrower from possible interest rate increases for the duration of the lock-in agreement (based on the terms of the agreement-always read the fine print to insure you know what your specific rights/obligations might be).
The lock-in commitment period is 15 days, and FHA loan rules state that the loan, “may close in less than 15 days at the convenience of the borrower, and the lender may still earn the lock-in fees.” The rules add that the participating FHA lender must honor the interest rate lock commitment as defined in writing unless the borrower and lender agree to change that agreement.
In the event that borrower and lender want to change the agreement, “The lender must provide the borrower with HUD-92900-B, HUD Interest Rate Disclosure Statement, to explain that the loan terms are negotiable. The lender must re-qualify a borrower if there is any increase in either the interest rate or discount points.” In these cases, a new credit check may be required.
The interest rate lock is a legally binding document. Borrowers who have disputes with the lender over the terms of this agreement should carefully review the fine print, consult a lawyer if necessary, and contact the FHA directly at 1-800 CALL FHA for advice on how to proceed, depending on circumstances.
Do you have questions about your FHA home loan or refinance loan? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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