Posted by Calnotary on 9/30/13 3:14pm
Msg #486510

Borrower refused to sign today

If he doesn't sign today and if he signs tomorrow does he will need to pay the whole month of OCT of interest on a FHA loan?

Reply by Yoli/CA on 9/30/13 3:19pm
Msg #486511

What did his LO say? Is this refi or purchase?

Is this primary residence, second home or investment property? Will it make a difference in this case? Lots of questions ......

Reply by Calnotary on 9/30/13 3:24pm
Msg #486513

Re: What did his LO say? Is this refi or purchase?

This is his primary res. and it's a refi.

Reply by Linda_H/FL on 9/30/13 4:48pm
Msg #486524

Did you have the docs? Your answer is on the HUD n/m

Reply by Susan Fischer on 9/30/13 6:27pm
Msg #486540

*Somebody* will pay every nano-second's interest to the

earner of that interest - but this is not a question I would have addressed with borrower.

Reply by Doris_CO on 9/30/13 6:30pm
Msg #486543

Those questions should be between the borrower and the loan officer. We're not there to sell the loan or induce the borrower to sign the docs if they are hesitant about the whole deal. If there is a RTC, we can explain how that works, but other then that, we can't do anything if the borrower doesn't want to sign. There might be other ramifications to not signing today, like a change in the payoff amount of the old loan, if there is one, besides a change in the interest for the month, or even losing a rate lock.

Reply by CJ on 10/1/13 10:57am
Msg #486607

My 2 cents.

When the borrower does not sign, it is technically not our problem: time to get someone else on the phone to answer questions.

But about the interest: my understanding is that whenever you close, you technically pay a whole month's interest anyway. The days in the month before the closing are rolled into the payoff. The days after the signing are in the hud. So they are going to pay for one whole month either way, whether it's September or October.

If he does have to pay for the days in October, he might have to also pay his October 1st payment, to cover the mortgage for September.

I have also seen at the beginning of the month when the September loan spilled over into October, they will credit a few days at the beginning of the month, so that the first payment of the loan (in November), will cover all the days of October, but those first days are credited back so he won't be double-charged. On the hud, the dates for the daily interest will be backwards, and there will be a credit in the charge column. Example:

901. Daily interest charges from 10-03-2013 to 10-01-2013 @ $20 / day - $60.

Reply by JanetK_CA on 10/2/13 12:00am
Msg #486701

Re: My 2 cents.

That's true enough, but I believe the OP was talking about something different. You're describing the typical situation where the interest for the current month is just split between the old loan and the new loan, even though it shows up in different places. However, it's my understanding from the LO who helped me refi out of my FHA loan a long while back, that FHA does not prorate loans. So in the case described here, they will likely be paying close to a full month's interest on two loans (unless something has changed since then).

Here's my understanding: Regardless of what day in the month the refi closes, FHA collects a full month's interest for the month in which the loan is paid off. So if the loan closes the beginning of a month, not only will the borrowers likely pay for most of a month in interest on the new loan, they will also pay another full month interest on the old loan. As a result, most LOs try to get FHA loans to close at the very end of the month to limit the payment overlap. Unfortunately, that effort can backfire and have the BO end up paying even more if the job doesn't get done in time.

I have no idea if there are any exceptions to this. Just sharing what I was told. (And I believe I've heard that again since.)