Posted on: 12th Sep, 2009 12:45 am
I understand that the Federal Government made large prepayment penalties on mortgages illegal in 2008. An attorney told me this as part of my attempting to get foreclosure help. I have not been able to find any other information on this, however. Can you help?
Thanks.
Thanks.
Hi,
As far as I'm aware of, prepayment penalty is prohibited on mortgages after first 3 years or after 60 days prior to the first interest rate reset on the loan, whichever is less. There are some states which have certain anti-prepayment penalty laws prohibiting the lenders from charging borrowers with high prepayment penalties. However, these laws and statutes do not apply to all types of mortgages. Hence, an attorney is the best person to guide you in this regard.
As far as I'm aware of, prepayment penalty is prohibited on mortgages after first 3 years or after 60 days prior to the first interest rate reset on the loan, whichever is less. There are some states which have certain anti-prepayment penalty laws prohibiting the lenders from charging borrowers with high prepayment penalties. However, these laws and statutes do not apply to all types of mortgages. Hence, an attorney is the best person to guide you in this regard.
They really do not need to ban those mortgages. Instead, the government should teach people to READ so they know what the heck they are signing. In addition, the loans with the pre-pay pentalties typically start with interest rates that are much lower than a traditional 30yr fixed for example. So, the pre-pay penalty is in place so there is enough time for the bank to earn some interest. That is fair...right? So, borrowers should be absolutely positive that they will be in their homes for at least the pre-pay period before they sign the docs.
There is no forgiveness for ignorance or irresponsibility.
There is no forgiveness for ignorance or irresponsibility.
