Hello Davidoakey,
Welcome to the forums.
The prepayment penalty remains as it is till date as there is no such law applicable nationwide to remove that.
But the U.S. Federal Reserve has proposed to curb down the prepayment penalties. The proposal urges that most prepayment penalties on high-cost loans should expire 60 days before an adjustable rate resets from the initial rate to a higher one. This will be applied to all sub-prime lenders.
But the mortgage laws vary from state to state. So if you could tell me the place where you live, I might help you to find the laws regarding prepayment penalty in your state.
Welcome to the forums.
The prepayment penalty remains as it is till date as there is no such law applicable nationwide to remove that.
But the U.S. Federal Reserve has proposed to curb down the prepayment penalties. The proposal urges that most prepayment penalties on high-cost loans should expire 60 days before an adjustable rate resets from the initial rate to a higher one. This will be applied to all sub-prime lenders.
But the mortgage laws vary from state to state. So if you could tell me the place where you live, I might help you to find the laws regarding prepayment penalty in your state.
We live in La Mesa, CA
Hello Davidoakey,
California law permits prepayment penalty under certain conditions. The terms of the penalty may vary depending upon your lender and the type of property you have. If you have a prepayment penalty that should be stated in the loan documents that you receive from your lender.
Prepayment penalties usually do not extend beyond 5 years and the standard penalty is 6 months' interest but this can also vary with lenders.
In California, the Assembly Democrats have already proposed to ban prepayment penalty that are applied when borrowers try to refinance into better loan programs. But this is yet to pass as a law.
California law permits prepayment penalty under certain conditions. The terms of the penalty may vary depending upon your lender and the type of property you have. If you have a prepayment penalty that should be stated in the loan documents that you receive from your lender.
Prepayment penalties usually do not extend beyond 5 years and the standard penalty is 6 months' interest but this can also vary with lenders.
In California, the Assembly Democrats have already proposed to ban prepayment penalty that are applied when borrowers try to refinance into better loan programs. But this is yet to pass as a law.
I would call the lender and threaten action if they do not remove the pre-payment penalty. Let them know that you are trapped in a mortgage that is bad and they are preventing you from refinancing. If you talk to the right people, you might be able to do this. edited for solicitation
Is their anyway I could convince my current lender to drop the pre payment penalty? I could refinance if I didn't have a $7,000 penalty.
Who is your lender? What kind of loan do you have?
i know that a prepayment penalty is an onerous thing, but did those borrowers with these hellacious penalties not bother to read what they were signing? good faith estimates contain a box that is either checked or un-checked to indicate if a loan has a penalty or not. it really isn't too hard to find.
lisa, i am kind of chuckling at the thought that the borrower might threaten to take action unless his lender removes the penalty. the lender will sit and say "uh-huh" and move on to the next irate caller.
i really don't think a borrower should have to pay a penalty, but every lender (i think) has them on one product or another, so it's a fact of the marketplace. threats, however, are generally a waste of time.
lisa, i am kind of chuckling at the thought that the borrower might threaten to take action unless his lender removes the penalty. the lender will sit and say "uh-huh" and move on to the next irate caller.
i really don't think a borrower should have to pay a penalty, but every lender (i think) has them on one product or another, so it's a fact of the marketplace. threats, however, are generally a waste of time.
gmakerley,
When a borrower becomes trapped in a mortgage with a high or adjustable rate mortgage because of the prepayment penalty then yes, they can talk to the right person to negotiate the prepayment penalty. We are not talking about calling and talking to a customer service person that can't do anything. I have done this for some of my clients so I know it's possible. With lenders really feeling the heat about some of the loans they have put people in, they are willing to negotiate more than they have in the past.
When a borrower becomes trapped in a mortgage with a high or adjustable rate mortgage because of the prepayment penalty then yes, they can talk to the right person to negotiate the prepayment penalty. We are not talking about calling and talking to a customer service person that can't do anything. I have done this for some of my clients so I know it's possible. With lenders really feeling the heat about some of the loans they have put people in, they are willing to negotiate more than they have in the past.
there is a fine line between negotiating and threatening; methinks you changed your tune a slight bit, lisa.
and yes, i realize that lenders are much more open to negotiation these days, to prevent losses before they happen.
thanks.
and yes, i realize that lenders are much more open to negotiation these days, to prevent losses before they happen.
thanks.
gmakerley,
I did not change my tune, I just needed to explain myself thanks to your comment. Again, when I said threaten, I meant that they can use the fact that they were put into a mortgage with a prepayment penalty that is trapping them and they can use that to negotiate (AS A NEGOTIATING TOOL). Don't take it personally because you work for a mortgage lender. I advise borrowers on how to get the terms they want and sometimes they need to more agressive to get it.
I did not change my tune, I just needed to explain myself thanks to your comment. Again, when I said threaten, I meant that they can use the fact that they were put into a mortgage with a prepayment penalty that is trapping them and they can use that to negotiate (AS A NEGOTIATING TOOL). Don't take it personally because you work for a mortgage lender. I advise borrowers on how to get the terms they want and sometimes they need to more agressive to get it.