Prepayment penalty scam … and we bailed out these ****ers?

[AK]

OK, so a while back I got preapproval from the Very Large Bank where I’ve been a “valued customer since 1987.” Let’s just say they recently acquired a big mortgage company run by an old orange guy, made a big deal about cleaning the place up, and then got a substantial chunk of government bailout money.

The Very Big Bank’s web site and all the paperwork stated very clearly: “No prepayment penalty.” Which I figured was a sign that the Very Big Bank had cleaned up things since the Orange Guy left.

Last night I was rereading the loan paperwork in anticipation of putting in a few offers … Then I noticed a small asterisk next to “No prepayment penalty” … After digging through a few pages of addenda, I found some small print that stated there would be a 2 percent prepayment penalty if I paid off more than 20% of the loan balance in the first three years!!!!!

So there is no prepayment penalty, as long as you don’t try to prepay the loan. Whisky Tango Foxtrot, OVER!!!!!

I’m tempted to say … how stupid do they think I am? Except … I must be stupid to trust a Very Big Bank.

[Coronita]

In practice, do you really plan on paying off more than 20% of the loan amount in the first 3 years? If so why not just put that amount down and lower your total loan amount off the bat?

[Coronita]

In practice, do you really plan on paying off more than 20% of the loan amount in the first 3 years? If so why not just put that amount down and lower your total loan amount off the bat?

[Coronita]

In practice, do you really plan on paying off more than 20% of the loan amount in the first 3 years? If so why not just put that amount down and lower your total loan amount off the bat?

[Coronita]

In practice, do you really plan on paying off more than 20% of the loan amount in the first 3 years? If so why not just put that amount down and lower your total loan amount off the bat?

[Coronita]

In practice, do you really plan on paying off more than 20% of the loan amount in the first 3 years? If so why not just put that amount down and lower your total loan amount off the bat?

[UCGal]

[quote=flu]In practice, do you really plan on paying off more than 20% of the loan amount in the first 3 years? If so why not just put that amount down and lower your total loan amount off the bat?[/quote]

Perhaps the borrower wants to have the option to refi again if rates drop significantly. (Not likely since rates are relatively low – but it’s good to keep options open.)

Or perhaps the borrower is expecting an inheritance – not yet in hand.

Lots of reasons why one might pay off a chunk in the first couple of years – but not have the cash to do it right now.

[UCGal]

[quote=flu]In practice, do you really plan on paying off more than 20% of the loan amount in the first 3 years? If so why not just put that amount down and lower your total loan amount off the bat?[/quote]

Perhaps the borrower wants to have the option to refi again if rates drop significantly. (Not likely since rates are relatively low – but it’s good to keep options open.)

Or perhaps the borrower is expecting an inheritance – not yet in hand.

Lots of reasons why one might pay off a chunk in the first couple of years – but not have the cash to do it right now.

[UCGal]

[quote=flu]In practice, do you really plan on paying off more than 20% of the loan amount in the first 3 years? If so why not just put that amount down and lower your total loan amount off the bat?[/quote]

Perhaps the borrower wants to have the option to refi again if rates drop significantly. (Not likely since rates are relatively low – but it’s good to keep options open.)

Or perhaps the borrower is expecting an inheritance – not yet in hand.

Lots of reasons why one might pay off a chunk in the first couple of years – but not have the cash to do it right now.

[UCGal]

[quote=flu]In practice, do you really plan on paying off more than 20% of the loan amount in the first 3 years? If so why not just put that amount down and lower your total loan amount off the bat?[/quote]

Perhaps the borrower wants to have the option to refi again if rates drop significantly. (Not likely since rates are relatively low – but it’s good to keep options open.)

Or perhaps the borrower is expecting an inheritance – not yet in hand.

Lots of reasons why one might pay off a chunk in the first couple of years – but not have the cash to do it right now.

[UCGal]

[quote=flu]In practice, do you really plan on paying off more than 20% of the loan amount in the first 3 years? If so why not just put that amount down and lower your total loan amount off the bat?[/quote]

Perhaps the borrower wants to have the option to refi again if rates drop significantly. (Not likely since rates are relatively low – but it’s good to keep options open.)

Or perhaps the borrower is expecting an inheritance – not yet in hand.

Lots of reasons why one might pay off a chunk in the first couple of years – but not have the cash to do it right now.

[AK]

Yeah, I might need to refinance, as unlikely as that might seem. Or I might need to sell. Ya never know.

Plus it’s a matter of principle. “No prepayment penalty” should mean “no prepayment penalty” and not “Oh gosh, you wanted to prepay that much? Well that’s different!”

[AK]

Yeah, I might need to refinance, as unlikely as that might seem. Or I might need to sell. Ya never know.

Plus it’s a matter of principle. “No prepayment penalty” should mean “no prepayment penalty” and not “Oh gosh, you wanted to prepay that much? Well that’s different!”

[AK]

Yeah, I might need to refinance, as unlikely as that might seem. Or I might need to sell. Ya never know.

Plus it’s a matter of principle. “No prepayment penalty” should mean “no prepayment penalty” and not “Oh gosh, you wanted to prepay that much? Well that’s different!”

[AK]

Yeah, I might need to refinance, as unlikely as that might seem. Or I might need to sell. Ya never know.

Plus it’s a matter of principle. “No prepayment penalty” should mean “no prepayment penalty” and not “Oh gosh, you wanted to prepay that much? Well that’s different!”

[Author]

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