Do FHA Loans Through Regions Bank Have Prepayment Penalties?

If you submitted an FHA mortgage payoff in the last four years and were charged a post-payment interest fee by Regions Bank, you could be owed money.

What FHA Rules Changed in the Last Four Years?

Federal Housing Administration (FHA) loan rules changed regarding prepayment of FHA mortgages that closed on or after Jan. 21, 2015. The new rule ensures the lender calculates the final interest charge according to the date the prepayment is made and not according to the next date an installment payment is due.

Before the new rule became effective, anyone who had secured a home loan through the FHA program and paid their loan off prematurely often had to pay a full month of interest, despite what day they paid off the loan.

Some banks are suspected of continuing to charge post-payment interest in violation of the new federal law. Post-payment interest is the interest you would have paid if you would have not paid the loan until the next due date.

Why Are FHA Loans Attractive in the First Place?

FHA loans are usually the choice of first-time homeowners because a lower down payment is required than with traditional loans. According to The Lenders Network, with an FHA loan, you also need a credit score of just 580 to qualify to put 3.5 percent down; with a credit score of 500 to 579, 10 percent down is needed. Nearly 46 percent of first-time home buyers bought their first home with an FHA loan in 2017.

Mortgage lenders of traditional loans are still allowed to charge prepayment penalties to people who pay off their mortgage sooner because different rules and regulations cover traditional mortgages.

Qualifying for FHA Loans

Although there are some ways that an FHA loan is more accessible to certain borrowers than other kinds of mortgages, a borrower must still meet certain conditions to get an FHA loan. The primary factors considered in qualifying for an FHA loan include working with a few lenders to see what options are available, credit scores, income to debt ratio, and income limits.

To get an FHA loan, you must have what is considered a reasonable debt-to-income ratio. While it can be difficult to figure out whether you meet this requirement, the amount spent on monthly loan payments should be relatively low in connection with your monthly income.

No minimum income is required, but typically FHA loans are meant more for lower-income borrowers. Many borrowers who are interested in FHA loans explore this route because of a credit score issue. According to The Balance, borrowers who have low credit scores are more likely to get approval for an FHA loan. With a 3.5 percent down payment, the minimum credit score could be 580. If you’re willing to put in more with the down payment, an even lower credit score might be accepted.

Regardless of the reasons that led you to consider an FHA loan, it’s important to be clear with your mortgage broker about what is expected of you and whether or not any fees might apply on your end. Some people have reported being caught off guard with unexpected fees or penalties that are assessed after the mortgage is approved. In some cases, this can involve fees that never should have been charged, according to some customers of Regions Banks.

Why is Regions Bank Under Investigation?

If you repaid an FHA loan that was originated on or after Jan. 21, 2015, federal rules say no interest should have accrued after the loan was paid off.

Attorneys are currently investigating whether various banks, including Regions Bank, charged prepayment penalties in the form of collecting interest after the loan was paid in full.

Regions Bank is in 16 states across the country, including Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, and Texas. Regions Financial Corporation has $125 billion in assets, runs 1,500 banking offices and 2,000 ATMs, according to its website. The company’s headquarters are in Birmingham, Ala.

Regions Bank reported consumer loan balances of $82 billion as of Dec. 31, 2018. Forty-five percent of the loans were mortgages and 30 percent were home equity loans. The company noted total ending deposits of $94 billion.

Mortgage loans appear to be a large part of Regions Bank’s business portfolio, which means employees should be well aware of the rules and regulations regarding FHA home loans.

If I Was Charged More Interest Than I Should Have Been, How Much Money Are We Talking About?

If a homeowner is illegally charged post-payment interest after an FHA mortgage payoff, it could cost the homeowner hundreds of dollars. Those who fought back are seeing FHA mortgage settlements like Wells Fargo.

According to an article in the Los Angeles Times, FHA borrowers paid more than $587 million in allegedly unnecessary interest fees on their loans in 2003 alone. Even a few dollars more illegally charged to one client at a time can add up to an extraordinary amount of illegal gains for a bank.

Join a Regions Bank FHA Mortgage Class Action Lawsuit Investigation

If you had an FHA mortgage loan with Regions Bank, and you sold, refinanced or paid off your mortgage early, you may have been charged a post-payment interest fee. If so, you may be owed money.

Learn More

This article is not legal advice. It is presented
for informational purposes only.