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mannyamd
54 Posts |
 Posted - 02/17/2008 : 8:23:17 PM
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California Civil COde 1916.5 (5)
5) The borrower is permitted to prepay the loan in whole or in
part without a prepayment charge within 90 days of notification of
any increase in the rate of interest.
Do lenders follow this Law? |
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directlending2u
436 Posts |
Posted - 02/17/2008 : 8:44:21 PM
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| wow , that would be sweet if the lenders folowed suit |
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directlending2u
436 Posts |
Posted - 02/17/2008 : 8:57:24 PM
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| i actually just looked it up for my own due diligence and YES they are now due to forecluser releif |
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slants
4274 Posts |
Posted - 02/17/2008 : 9:03:27 PM
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Apparently it was always true:
http://www.tomvoli.com/negotiating-mortgage-pre-payment-penalties/
Bryan Biggs on July 25, 2007 at 5:30 pm
I am a competitor and am surprised you are not aware of California Civil Code Section 1916.5.5 that states, “The borrower is permitted to prepay the loan in whole or in part without a prepayment charge within 90 days of notification of any increase in the rate of interest.”
This is exactly the law that mortgage brokers send to the payoff department when refinancing loans that have a prepayment penalty that is longer than the fixed term of the loan. The payoff department must remove the prepayment penalty in this case or they are referred to the California State Attorney’s office for violation of California Civil Code. |
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slants
4274 Posts |
Posted - 02/17/2008 : 9:21:32 PM
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I take that back. Just found this article by DocMagic from 2005 indicating that the code only applies to purchase and construction loans (refi's not covered) made by DRE licensees - does not apply to loans made by "supervised financial organizations" - banks, savings associations, savings banks, credit unions, industrial loan companies and CFL and RMLA licensees:
http://www.docmagic.com/compliance/wizard/2005/nov-dec-2005/california-039-s-prepayment-penalty-addendum-and-rider
"OTS Says: Parity Act No Longer Preempts Prepayment Penalties" that is posted on our website, the above provision only applies to variable interest rate loans made to finance the purchase or construction of four or fewer residential units and is based on California Civil Code Section 1916.5(a)(5). The article further provides that the limitations in Section 1916.5 do not apply to loans made by "supervised financial organizations," a defined term that includes, among others, banks, savings associations, savings banks, credit unions, industrial loan companies and CFL and RMLA licensees, but does not include DRE licensees.
Thus, if a California loan has a variable interest rate, the purpose of the loan is to finance the purchase or construction of real property containing four or fewer residential units or on which four or fewer residential units are to be constructed, and the lender is not a supervised financial organization, then the borrower will have the right to prepay the loan without penalty within 90 days of notification of any increase in the interest rate.
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