HUD Increases Adjustment Caps on Five-Year FHA ARMs
In a move to more closely align the terms for FHA-insured adjustable rate mortgages with conventional ARMs, the Department of Housing and Urban Development announced last week that the annual adjustment cap on FHA-insured five-year adjustable rate mortgages will be increased to 2%, up from 1% currently. The change takes effect on April 28. HUD also announced that it is increasing the lifetime cap on interest rate adjustments for five-year ARMs to 6%, compared to 5% currently. The annual and lifetime caps for one-year and three-year ARMs will remain at 1% and 5%, respectively, as required by law. The annual and lifetime caps for seven-year and 10-year FHA-insured ARMs are already at 2% and 6%. HUD published these changes in an Interim Rule, which technically allows for public comment until May 31. However, it is doubtful that HUD will deviate from this rule, because the changes have strong industry support. | 
