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Prepayment Disclosure Statement

What is Prepayment Disclosure Statement?

Prepayment Disclosure Statement

Prepayment Disclosure Statement is statement on the amount outstanding on a FHA insured mortgage loan and the requirements that the borrower must fulfill to meet upon prepayment to prevent accrual of interest after the date of prepayment.

The outstanding amount identified in the Prepayment Disclosure Statement is good through the date mentioned in the disclosure. If identified in the disclosure, the balance amount may also include penalties, late charges, advances, any other charges related to the loan, and any foreclosure or bankruptcy expenses incurred to date under the mortgage.

The mortgage servicer provides the statement to the borrower on an annual basis for all FHA insured forward mortgage loans. The requirement for sending the disclosure is prescribed in the FHA Single Family Housing Policy Handbook under 4000.1 Part III (A) (1) (m).


Contents of Prepayment Disclosure Statement

The key information contained in Prepayment Disclosure Statement is:

  1. Borrower Information: This includes the borrower's name and address.
  2. Loan Information: This includes the loan number and FHA loan number.
  3. Outstanding Amount: The amount outstanding on the loan for prepayment of the mortgage loan.
  4. Good Through Date: The outstanding amount will payoff the mortgage if made on or before this date.
  5. Lender/Servicer Information: Name of the mortgage servicer and the name and telephone number of the contact person that can be reached to address any questions relating to the disclosure.

Borrower's Considerations

Prepayment Amount and Conditions for Prepayments

The disclosure helps you to understand the current unpaid principal balance amount on the mortgage loan and the conditions that you must meet to prevent accrual of interest after the date of prepayment. No action is required if you do not plan on prepaying the loan.

If you plan on prepaying the loan, then you should review the statement and understand the conditions for prepayment. In addition to relying on the information in the Prepayment Disclosure Statement, you should contact the servicer and obtain a payoff disclosure statement. The payoff disclosure statement will provide the specific payment amount that is required to be paid on a particular date to fully payoff the loan, which includes payments for unpaid principal balance, penalties, advances, and fees associated with payoff. This will avoid any surprises due to accounting adjustments, reconveyance fees, or other fees.


Mortgage Lender's/Servicer's Considerations

Applicable Requirements

As a mortgage servicer or lender that is servicing the FHA insured loan, you should review the 4000.1 Part III (A) (1) (m) Disclosures section of the HUD FHA Single Family Housing Policy Handbook to fully understand the requirements related to Prepayment Disclosure Statement. The handbook implements 24 CFR 203.9

Record Keeping

The mortgage servicer or lender that is servicing the loan must retain a copy of the annual Prepayment Disclosure Statement in the servicing file.


The disclosure must be provided to the borrower on an annual basis.

Model Disclosure

HUD has developed a model disclosure that you should use when sending the disclosure.


Document Summary

Prepayment Disclosure Statement
Prepayment Disclosure Statement informs the borrower of the outstanding mortgage amount and the conditions that must be met to prevent accrual of interest after the date of prepayment.
Common Names
Prepayment Disclosure Statement
Provided By
Mortgage Servicer
Provided To
Notarization Required
Signed By
Life Cycle Stage
Annual form must be retained in the servicing file.
Model Form
4000.1 Part III (A) (1) (m)
Applicable Laws
FHA Single Family Housing Policy Handbook, 4000.1 Part III (A) (1) (m). This section of handbook implements 24 CFR 203.9

Updated: Nov 24, 2018


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