For Mortgages Closed Before January 10, 2015, if the notice follows an adjustment in the monthly payment, the Mortgagee must provide the Borrower notice:
- at least 25 Days before any adjustment; or
- at least 30 Days before the adjustment if the mortgage agreement contains a provision stating that 30-Day requirement.
The content of the Adjustment Notice must advise the Borrower of:
- the new mortgage interest rate;
- the amount of the new monthly payment;
- the current index interest rate value; and
- how the payment adjustment was calculated.
- by Certified Mail, return receipt requested; or
- by first-class mail to all property owners identified on its records.
If the Mortgagee fails to provide the Adjustment Notice to the Borrower for more than one year, then the Mortgagee must determine an adjusted interest rate for each omitted year, in order to determine the adjusted interest rates for subsequent years, and perform the following:
- If the Mortgagee’s calculations result in an increase of the interest rate, the Mortgagee has forfeited their right to collect the increased amount and the Borrowers are relieved from the obligation to pay the increased payment amount.
- If the Mortgagee’s calculations result in a decrease of the interest rate, the Mortgagee must refund the excess, plus interest from the date of the excess payment to the date of repayment at a rate equal to the sum of the margin and index in effect on the Change Date.
- provide the Borrower with a cash refund; or
- apply the remaining excess to the unpaid principal balance of the Mortgage.
HUD requires that errors be corrected if:- the Mortgagee miscalculates the interest rate and/or the monthly payment; and
- the errors are reflected in the notice.
For policy information see Handbook 4000.1 III.A.3.a.iv at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh