California Civil Code Section 2954.10 -- What does it really mean?

[pengu14]

What is the name of your state? California

For reference, I've attached the language below... my situation is that I'm considering selling my principal residence, a condo in California. I have a prepayment penalty clause in my loan which doesn't expire until June 2008. However, my interpretation of the code below and what I've read in a couple places seems to be that the lender can't charge a prepayment penalty if I sold the property because they would be triggering a due-on-sale close for repayment of the loan. Is this correct?

Is there also a Federal law of some sort that may supercede this that I should know about?

Thanks !

- Marc

Ref:
California Civil Code Section 2954.10

An obligee which accelerates the maturity date of the principal and accrued interest, pursuant to contract, on any loan secured by a mortgage or deed of trust on real property or an estate for years therein, upon the conveyance of any right, title, or interest in that property, may not claim, exact, or collect any charge, fee, or penalty for any prepayment resulting from that acceleration.

The provisions of this section shall not apply to a loan other than a loan secured by residential real property or any interest therein containing four units or less, in which the obligor has expressly waived, in writing, the right to repay in whole or part without penalty, or has expressly agreed, in writing, to the payment of a penalty for prepayment upon acceleration. For any loan executed on or after January 1, 1984, this waiver or agreement shall be separately signed or initialed by the obligor and its enforcement shall be supported by evidence of a course of conduct by the obligee of individual weight to the consideration in that transaction for the waiver or agreement.

[efflandt]

That does not appear to give you an out if you expressly agreed, in writing, to the payment of a penalty for prepayment upon acceleration. See Financial Code - Division 1.6 Chapter 2 of [url]http://www.dre.cahwnet.gov/predlaw.htm[/url] to see if anything there helps. But look them all over for exceptions.

There may be other prepayment penalty limits to search for if the lender is state or federally chartered. But those limits only apply to those institutions.