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Definition of an FHA Loan
An FHA loan is a mortgage backed by the government and insured by the Federal Housing Administration (also known as the FHA). According to Investopedia, FHA loans are quite common among first-time homebuyers for a few important reasons: compared with the typical loan, the minimum credit score required is lower, the down payment is lower, and they don’t come with any prepayment penalties. FHA loans have fixed-rate terms of 15 and 30 years.
One aspect of FHA loans that is important to understand is that borrowers are required to pay FHA mortgage insurance, which is meant to protect the lender from a loss if a consumer defaults on the loan. Bankrate notes that this includes an upfront premium of 1.75 percent of the loan amount, paid upon getting the loan, as well as an 0.45 percent to 1.05 percent annual premium, which is divided up and paid monthly.
Unfair Post-Payment Interest Fees
Unfortunately, there is a hidden catch to FHA loans: if a borrower paid off their mortgage early, the bank could charge them interest on the loan until the end of the month, even if they had technically closed the loan at the beginning of the month. This could end up costing the borrower hundreds of dollars—essentially, a penalty for paying off a loan early.
For years, consumers complained about this post-payment interest practice—which, coincidentally, brought in millions of dollars annually on FHA loans.
The Consumer Financial Protection Bureau (CFPB) took a major step forward in putting a stop to charging post-payment interest fees by prohibiting the controversial practice in 2015 under federal law. However, some banks may still be charging their customers post-payment interest fees on the loans after they’ve paid them off, in violation of the CFPB rule.
FHA Loan Lawsuits
Some consumers have fought back against illegal post-payment interest fees, turning to litigation. A customer who filed one such lawsuit against Sun West Mortgage—as a class action lawsuit, which included herself and others in a similar position—alleged that the bank had wrongfully charged them interest on their FHA loans after they had already paid it off.
Lawyers are now investigating certain banks to see if they might be illegally charging customers post-payment interest fees on paid-off loans. Lawyers are investigating Regions Bank in particular, which operates around 1,500 branches across 16 states, including Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, and Texas.
Filing a Regions Bank FHA Loan Lawsuit
If you have been affected by post-payment interest or other unfair FHA loan practices at Regions Bank, you may be able to file a lawsuit and pursue compensation. The litigation process can be overwhelming, so Top Class Actions has laid the groundwork for you by connecting you with an experienced attorney. Consulting a lawyer can help you determine if you have a claim, navigate the complexities of litigation, and maximize your potential compensation.
