Does Virginia allow state-chartered institutions to charge prepayment penalties on mortgage loans? My understanding is that the federal Parity Act allows this and supercedes any state legislation that might prevent it. Is this correct?

I was previously at an OTS regulated bank organized under laws of US w/ it's main office in VA. We charged PPPs plus had an industrial loan license for our affiliate where we could charge a PPP. We hung our hat on the parity act a lot. But we made sure that the bank is the lender on the loans docs, providing the funds, etc.

It's not really a yes or no answer and it depends on a lot of things. There are opinions on both sides of this issue.

I would call your regulator and the VA Dept of Financial Institutions at #804-371-9657.

The VA DFI and Attorney General might not be the most unbiased sources to contact. VA was sued on their stance on the Parity Act, lost, appealed the decision, lost again and I believe then tried to appeal to the US Supreme Court (who did not accept the case).

jon m

This comes from the Virginia website:

§ 6.1-330.83. Prepayment penalty for loan secured by home occupied by borrower.
The prepayment penalty in the case of a loan secured by a mortgage or deed of trust on a home which is occupied or to be occupied in whole or in part by a borrower shall not be in excess of two percent of the amount of such prepayment.
§ 6.1-330.81. Certain contracts to permit prepayment; amount of prepayment penalty.
A. Every loan contract, except as provided in subsection C of this section, secured by a first deed of trust or first mortgage on real estate, where the principal amount of the loan is less than $75,000, shall permit the prepayment of the unpaid principal at any time and no penalty in excess of one percent of the unpaid principal balance shall be allowed.
B. Any prepayment penalty provision in violation of this section shall be unenforceable as to the amount in excess of one percent of such balance.
C. The provisions of this section shall not apply to secured or unsecured notes evidencing installment sales contracts. The provisions of this section relating to prepayment penalty shall not apply to loan contracts subject to § 6.1-330.83 or § 6.1-330.84 or to loan contracts governmentally regulated as to prepayment privilege.

Are prepayment penelties legal in the state of Wyoming ?