CA Foreclosure
Can anyone tell me if a servicer is prohibited from charging a prepayment penalty on a property being sold in foreclosure. The property is located in the state of California.
To find an answer to your question, I consulted the Legislative Councel of California's website at http://www.leginfo.ca.gov/cgi-bin/statquery. Bear in mind this is strictly the California code, this is not to be considered legal advice, you should consult a lawyer for clarification. However, simply based on the what is written, in my opinion, the apparent short answer to you question would be yes. I have clipped the relavent pieces from the bill and attached as follows: SEC. 1. Section 4970 of the Financial Code, was amended by Assembly Bill 489 of the 2001-02 Regular Session and approved by the governor on October 10, 2001 to iinclude: (1) "Covered loan" means a consumer loan in which the original principal balance of the loan does not exceed two hundred fifty thousand dollars ($250,000) in the case of a mortgage or deed of trust, and where one of the following conditions are met: (A) For a mortgage or deed of trust, the annual percentage rate at onsummation of the transaction will exceed by more than eight percentage points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor. (B) The total points and fees payable by the consumer at or before closing for a mortgage or deed of trust will exceed 6 percent of the total loan amount. and further: SEC. 2. Section 4973 of the Financial Code, was amended by Assembly Bill 489 of the 2001-02 Regular Session and approved by the governor on October 10, 2001 to iinclude: (2) A covered loan may include a prepayment fee or penalty up to the first 36 months after the date of consummation of the loan if: (A) The person who originates the covered loan has also offered the consumer a choice of another product without a prepayment fee or penalty. (B) The person who originates the covered loan has disclosed in writing to the consumer at least three business days prior to loan consummation the terms of the prepayment fee or penalty to the consumer for accepting a covered loan with the prepayment penalty and the rates, points, and fees that would be available to the consumer for accepting a covered loan without a prepayment penalty. (C) The person who originates the covered loan has limited the amount of the prepayment fee or penalty to an amount not to exceed the payment of six months' advance interest, at the contract rate of interest then in effect, on the amount prepaid in any 12-month period in excess of 20 percent of the original principal amount. (D) A covered loan will not impose the prepayment fee or penalty if the covered loan is accelerated as a result of default. (E) The person who originates the covered loan will not finance a prepayment penalty through a new loan that is originated by the same person.
quote:If 1 (A) and (B) do not apply (loan is not high cost) does the same hold true
Originally posted by Sandie
Can anyone tell me if a servicer is prohibited from charging a prepayment penalty on a property being sold in foreclosure. The property is located in the state of California.
There should be a provision regarding the charging of the prepayment penalty fee if the loan is accelerated on the deed of trust and/or the note. If not, you would revert to CA state law. I also would consult your legal or state research team if state law needs to be interpreted.