Many Thanks to Weebly
TPJaveton wishes to extend appreciation to Weebly for the resources and tools they provided which helped to make this website possible. We invited our friends and supporters to come along with us throughout the creation of Borrower-friendly Loans for two reasons. First, we hope you will continue to support us in continued efforts to provide our unique brand of quality mortgage financing information. Second, is to provide a glimpse into what it takes to create a Weebly website, and as you can see B-fL is a finished site; So anyone who aspires to create a website using the 'do-it-yoursel' method, should check out what Weebly has to offer. You bring the creative ideas and the time, and Weebly will provide the tools, resources, and the space in which to work. To learn more about Weebly follow the 'Create a free website' link below. Thanks to everyone! Borrower-friendly Loans was launched successfully on November 11, 2009.
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Law makers over three decades ago found it necessary to create new regulations that residential mortgage lenders, mortgage brokers and real estate brokers would be governed by because of conditions which existed in the inter-related mortgage and real estate industries then.
In view of the recent Sub-prime crises, it seemed necessary to enact more vigorous regulations in an attempt to avert a similar crises three decades from now; but here's my thinking on that kind of dilemma. Whenever there have been an opportunity for "people" to get quick and easy results where the reward was monetary enrichment, they have taken the easy route. What will the next wave of "quick and easy" money look like? How would you recognize it? Who would prevent it?
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The Prepayment Penalty Question
What is a prepayment penalty? Or prepay penalty if you like. How does it affect your home buying decisions? Why some lenders would want to impose a prepayment penalty. Could a prepayment penalty ever be considered a prepayment privilege? These are some of the questions that I will take a closer look at in this article and also try to provide some answers to.
A prepayment penalty is a fee charged by the mortgage lender/holder/servicer when a home owner repays the mortgage in full before the due date or a date specified (ranging from the one year anniversary of loan closing to the five year anniversary) in the loan documents or any other time frame set by a home loan lender. The reasoning put forth by lenders to justify a prepayment penalty is the need to have a minimum guarantee of income earned on the funds loaned.
Prepayment penalties should not affect your home buying decisions if you are able to identify types of mortgages that are likely to impose such penalties. For example, when you take a close look at available mortgage types and realize that a fixed rate mortgage carries the same interest rate and payment of principal & interest (thus fixed rate) for the duration of the mortgage loan term; and adjustable rate mortgages (ARMs) provide for changes in the interest rate and principal & interest payment at predetermined periods, you may draw your own conclusion as to which of these mortgage types carry a prepayment penalty, and the reason behind such a penalty.
Let's take a closer look. A home buyer who closes on his/her transaction in a high interest rate market may look forward to the day when interest rates fall two to three percentage points below the interest rate s/he reluctantly closed at, so a refi (refinance) into a lower interest rate may be possible. When such a refi occurs it is great for the homeowner, but not so great for the lender/servicer who stands to lose money, so to prevent this from happening a prepayment penalty clause helps to prevent such a refi from taking place thereby protecting the lender's interest.
It used to be that whether the loan carried a fixed interest rate or adjustable interest rate, lenders could impose a prepayment penalty, but that has changed for the most part. Under current laws designed to protect consumers, prepayment penalties are not permitted on FHA mortgages originated in any of the 50 states and are permitted only on certain types of conventional mortgages but not in all states.
Chances are that a prepayment penalty would be imposed only on certain types of ARMs, so it will be necessary to examine your mortgage docs (Truth-in-Lending disclosure) or consult with your loan specialist who could tell you if there is a mortgage prepay penalty as well as do a mortgage prepayment calculation for you if there is one. In just about every mention of the charge one has to pay as a consequence of prepaying his/her mortgage, the term used to describe this event is is prepayment penalty. There was, however, a time when some lenders introduced a different term - “prepayment privilege” - to identify such early prepayment of a mortgage.
Those lenders who proposed the new term reasoned that since prepayment of a mortgage would be beneficial to the homeowner (after all, why would anyone want to prepay his/her home loan mortgage unless s/he got a great deal on a sale or a new “lower” interest rate) and therefore that homeowner would be paying for the privilege of getting out of an otherwise binding contract earlier than agreed upon; Thus the term prepayment privilege. Needless to say, that term did not stick (around too long) because, ultimately, having to pay any kind of a fee or charge always feel more like a penalty than a privilege.
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