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#1077141 - 11/05/08 08:32 PM Colorado Prepayment Penalty
OldSchoolBanker Offline
Platinum Poster
Joined: May 2005
Posts: 652
FL
Can a Colorado Compliance Pro help confirm that it is permissible to charge a penalty on a non-HOEPA loan? We have a 5-1 ARM and would like to charge a 1yr prepay penalty on a jumbo loan, 6% rate, amortizing payments. This is a refinance of existing loan with another lender, direct lending to the client from our bank, no mortgage broker involved.
Thanks
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Old School Banker

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#1083406 - 11/18/08 05:18 PM Re: Colorado Prepayment Penalty OldSchoolBanker
Geoz Offline
100 Club
Joined: Apr 2003
Posts: 148
Colorado
It sounds like your loan would be exempt from UCCC 5-2-210's prohibition on prepayment penalities --- based on an assumption the refinance is a refi of an acquistion loan. In other words, your mortgage loan needs to be exempt from coverage as a "consumer credit transaction" under the UCCC. Most 1st lien residential mortgage transactions (acquisition or refinance of acquisition) are exempt from the PPP prohibition.
http://www.michie.com/colorado/lpext.dll?f=templates&fn=main-h.htm&cp=

The only other restriction I'm aware of is the Colorado Consumer Equity Protection Act --- I assume when you say HOEPA doesn't apply you tested using the state's lower points and fees trigger. I'm not aware of any new legislation that might affect this, but as always, consult your legal when in doubt!

5-2-210. Right to prepay.
Subject to the provisions on rebate upon prepayment contained in section 5-2-211, the consumer may prepay in full, or in part if payment is no less than five dollars, the unpaid balance of a consumer credit transaction at any time without penalty. A

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