There was a post by JT-IN earlier last year were he had the a prepayment penalty clause that was going to eat into his profit…at least I think. I believe lenders cannot have their cake and eat it too. In other words, I do not believe they can enforce DOS and then the PPC (prepayment penalty clause). He was ready, willing and able to refi the loan. Thus, he was going to try everything in his power to make the lender enforce the DOS. I wander how it turned out?
When I went to closing, the mortgage broker slipped in
a form stating that I couldn’t refi for 5 yrs or I would
pay a prepayment penalty. Since I had made a large
downpayment that I didn’t want to loose I signed the
papers. There must be a way to refi without paying a
prepayment penalty. I’m open to all ideas.
What your mortgage company or loan officer did was highly unethical, but very common in dealing with some mortgage companies. Most prepayment penalties are 2-5%. You have a few choices; eat the 2-5% in any refinancing you do, if you need cash take out a 2nd, or complain with reckless abandon to the company with who now holds your mortgage.
I have seen many times the lender release the prepayment penalty without legal action. Just the threat, persistance with your complaint that you were under great stess at the closing and that you had little choice or you would loose you earnest money or so forth.
Check what lender you used and do a search to see if there is any legal action against the lender or broker who pull the old bait and switch on you. Knowing there is a class action settlement or previous misrepresentations may help your case. I have seen the lender many times waive the prepayment penalty and many times reduce it. I believe if they will reduce it they will waive it with further persistance. Get the waiver in writing and a copy of the payoff before proceeding.
If banks are so horny about the due on sale clause, what if you notified them that you violated it? Wouldn’t they immediately demand that you pay off the loan in full? And if you had already arranged a new mortgage with another lender couldn’t you pay them off right away?
In all the discussion of the DOS I have never heard of them invoking a prepayment penalty LOL.
This is just an idea, maybe someone with more bank experience can tell me if it would work?
Re: I need to refi but I have to wait 5 yrs!!! - Posted by James Strange
Posted by James Strange on January 07, 2003 at 03:36:57:
I am going to guess that when you shoped for a loan you only asked about rate. If you shop for the lowest rate the broker with the lowest rate will have a prepay.