Prepayment Rider - Posted by Dave

Real Estate Investing
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Posted by Michael Morrongiello on March 03, 2006 at 10:45:18:

Dave:
YES its possible for the prepayment penalty language to ONLY appear in the promissory note instrument and not the deed of Trust or Mortgage.

Whenever you are taking over a loan and its obligation to make future payments you SHOULD obtain a copy of the Note and READ the Note.

Best to your success,
Michael Morrongiello

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Prepayment Rider - Posted by Dave

Posted by Dave on March 01, 2006 at 20:32:42:

All,

Is it save to assume that if a deed of trust does not have a prepayment rider that there is in fact no prepayment penality?

I’m in CA it that makes a difference.

Thanks,
Dave

PS. Your censor found the domain name part of my true email address ‘offensive’, so I am using a fake email address. Does this site have something against Time Warner? It’s a big main stream service provider in my area.

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Re: Prepayment must be written into the agreement - Posted by Michael Morrongiello

Posted by Michael Morrongiello on March 02, 2006 at 20:27:27:

Dave:
Typically a prepayment penalty (or rider) involved in paying off a Note (Mortgage, Trust Deed or otherwise) would be language that would have to be stated within the Note and /or Mortgage (or Trust Deed, contract, etc.)

If no such language exists - it would be very difficult for a lender to claim that such a prepayment penalty is due upon paying a Note off early.

Best to your success,
Michael Morrongiello

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Re: Prepayment must be written into the agreement - Posted by Dave

Posted by Dave on March 03, 2006 at 10:20:31:

Sorry, I wasn’t clear.

Is it possible (legally) for the prepayment writing to be in the note and not the deed of trust, and still be valid?

This is probably an issue more when buying a house subject-to existing liens. Specifically, buyer gets a reinstatement quote for the foreclosing loan without looking at the note (bad idea I know, but it happens), reinstates, takes title, fixes and flips. Then, when reselling to a homebuyer paying off existing lien(s) finds on the payoff demand a whopping prepayment penalty?oops.

Ideally, investor would get the note AND deed of trust, look very closely at what she is getting into THEN buy subject-to IF it makes sense. But, since some lenders are a pain in the kester wrt providing a copy of the note (borrower never seems to have a copy) it would be nice to only rely on the recorded (read easy to get hold of) deed of trust as the exclusive document in determining the existence of a prepayment penalty.

But, obviously, it isn?t wise to rely on the deed of trust exclusively if there isn?t some law requiring the prepayment penalty be there to be valid.

Thanks for any help you can provide.
Dave