What is a Post-Payment Interest Fee?

Attorneys are looking into Regions Bank and other financial institutions, following suspicions that some banks may still be charging illegal post-payment interest fees for early repayment of FHA loans. These charges represent interest that continues to accrue even after the loan has been paid off. Charges like these are a violation of FHA regulations.

What is a Post-Payment Interest Fee?

A post-payment interest fee is a fee that is assessed during early mortgage repayment. Under rules in effect since 2015, mortgage lenders are only supposed to charge interest through the date that the FHA mortgage is paid in full.

However, some lenders may be charging interest through the end of the month in which the mortgage was paid off. These lenders may be calculating the interest due as of the next payment installment date, rather than the actual date of early payment.

This post-payment interest fee can cost borrowers large sums of money when they pay off their mortgage in the beginning of the month, but are charged interest through the entire month. In 2012 alone, FHA loan holders paid nearly $450 million in post-payment interest fees.

FHA Interest Fee Rules and Regulations

In 2015, the Department of Housing and Urban Development (HUD) and Federal Housing Administration (FHA) instituted a new rule regarding post-payment interest charges for single family mortgage loans.

According to the new FHA regulations, mortgage lenders must accept loan prepayments at any time on FHA-insured loans that closed on or after Jan. 21, 2015. Additionally, lenders are not allowed to charge prepayment penalties on these loans.

Lenders are also required to give qualified borrowers a 60 to 120 day prior notice regarding adjustments or increases to their monthly payments. Prior to the new FHA regulations, many mortgage lenders assessed post-payment interest fees on mortgages that were paid early.

Charging post-payment interest fees on loans that closed on or after Jan. 21, 2015 is now a violation of federal regulations. However, some homeowners report their lender may still be assessing these early payment interest charges for borrowers.

Which Financial Institutions are Under Investigation?

Attorneys are investigating financial institutions such as Regions Bank for evidence of illegal post-payment interest fees. Lawsuits have also been filed against several banks for allegedly assessing illegal fees or failing to properly inform borrowers of their mortgage fees. These banks include Bank of America, Wells Fargo Mortgage, U.S. Bank and SunTrust Mortgage.

Recent Wells Fargo Settlement

As part of a settlement preliminarily approved on August 22, 2018 and reported on in a Law360 article on the same date, Wells Fargo has agreed to pay $30 million to settle claims that the bank charged homeowners post-payment fees on their mortgages.

According to the court, the settlement amount represents approximately 11 percent of the alleged total amount of interest fees collected by the bank during the period covered by the class action lawsuit.

The class size for this lawsuit was estimated to be at least one million strong. Given the enormity of the class and the multi-state nature of the action, takeaway from the settlement is averaged at $19.50 per claimant.

The settlement, which was finally approved by a judge in the U.S. District Court for the Northern District of California according to Bloomberg Law, will resolve an original complaint issued by plaintiffs Vana Fowler and Michael Peters. The court also approved awards of $7,500 for Fowler and $5,000 for Peters to be paid out of the settlement.

The case was registered in March 2017 and alleges that the plaintiffs were charged interest on a Federal Housing Administration (FHA) insured mortgage after it was paid off early. They claimed that this was part of an ongoing practice that affected FHA mortgagees whose loans closed between June 1, 1996, and Jan. 20, 2015.

The Law360 report indicates that banks could charge interest after a loan is paid off up until the next monthly payment interval date prior to the change of law.

Nevertheless, the lender had to be in full communication and compliance with the U.S. Department of Housing and Urban Development (HUD) provisions and regulations. After the law changed on January 21, 2015, many banks purportedly continue to collect post-payment interest in violation of these regulations.

If you have been assessed a post-payment interest fee on your mortgage by Regions Bank, you may qualify to join a Regions Bank investigation regarding interest fees and penalties. Borrowers who qualify for this investigation must have sold, refinanced, or paid off their FHA mortgage loan early, on or after Jan. 21, 2015.

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.

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