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#2046951 - 10/29/15 03:56 PM Prepayment Penalty
Here4Life Offline
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Joined: Feb 2010
Posts: 119
Help, I'm confused!!

I have a multi-advanced, closed-end construction loan set up for 9 months on what will be the consumer's primary residence. I do not have a take out commitment, but I am sure once the construction phase is complete the consumer will refinance to another financial instiution (from comments made by consumer). Can I charge a prepayment penalty on the construction if the consumer does not obtain permanent financing with us?

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Lending Compliance
#2046955 - 10/29/15 03:58 PM Re: Prepayment Penalty Here4Life
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
How would that be a prepayment? The loan would be matured?
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#2046971 - 10/29/15 04:21 PM Re: Prepayment Penalty Here4Life
Here4Life Offline
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Joined: Feb 2010
Posts: 119
Yes, I agree the loan would be matured if the 9 months were up, but what if the construction phase ends in 6 months?

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#2047014 - 10/29/15 05:57 PM Re: Prepayment Penalty Here4Life
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,835
Bloomington, IN
Did you contract for pre-payment penalty in your loan agreement? If not then you can't charge one.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2047016 - 10/29/15 06:01 PM Re: Prepayment Penalty Here4Life
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
Exactly, you cannot retroactively change a contract without the customer's agreement. I doubt they would agree.
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#2047028 - 10/29/15 06:12 PM Re: Prepayment Penalty Here4Life
Here4Life Offline
100 Club
Joined: Feb 2010
Posts: 119
Sorry I guess I should have mentioned this earlier...The lender has only received the application, the process is just starting.

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#2047035 - 10/29/15 06:18 PM Re: Prepayment Penalty Here4Life
Kathleen O. Blanchard Offline

10K Club
Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
I have to say, I have never seen a prepayment penalty on a construction loan.
_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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