Prepayment penalty on the dead?

[po'girl]

What is the name of your state? Maryland

I am selling the home of my father, who is deceased. There was a small mortgage he'd refinanced in Jan '06. The lender told the title company there was a prepayment penalty.

Considering...
1). I have copies of pro forma documents (nothing that was signed) which indicate that no prepayment penalty was to be in the loan.
2). We are selling rather than re-financing
3). The reason the home owner is "pre-paying" is beyond anyone's control

should I push back and try to get this waived? We go to settlement this Friday (Oct 20) can the buyers object if I delay settlement a few days until this is resolved? Penalty is $1,400 and we're already selling at a loss.

Thank you!What is the name of your state?

[danno6925]

The lender told the title company there was a prepayment penalty.

And the title company is just being a good sport, and taking their word for this? Hopefully, there's proof the lender gave title company that they can provide you with before settlement regarding this ppp.

1). I have copies of pro forma documents (nothing that was signed) which indicate that no prepayment penalty was to be in the loan.

The unsigned docs are no good.
There ARE at least two places you can look to determine the existence of a ppp. First is the Note. If there is a prepayment penalty rider, pay up. Second is the Truth In Lending (TIL) on which there will be a field in which the existence or absence of a ppp will be specifically noted. I don't know if Maryland lenders include the ppp on the mortgage or not. If so, that's another place to look

2). We are selling rather than re-financing

Doesn't matter. You're still paying off the loan before the original maturation date, hence the prepayment penalty.

3). The reason the home owner is "pre-paying" is beyond anyone's control

If there is a valid ppp, the lender won't care one. They're being paid off early, and the reason notwithstanding, they will be entitled to it since your father agreed to it when he signed the mortgage documents.

[moburkes]

danno-You didn't respond to me on the other post.

Thanks for the info on the pre-payment penalty. I didn't realize that it also applied to home sales. I thought it was for refi's. I've never had a mortage with a penalty in it, but its a good thing to know.

[nextwife]

Originally Posted by po'girl

What is the name of your state? Maryland

I am selling the home of my father, who is deceased. There was a small mortgage he'd refinanced in Jan '06. The lender told the title company there was a prepayment penalty.

Considering...
1). I have copies of pro forma documents (nothing that was signed) which indicate that no prepayment penalty was to be in the loan.
2). We are selling rather than re-financing
3). The reason the home owner is "pre-paying" is beyond anyone's control

should I push back and try to get this waived? We go to settlement this Friday (Oct 20) can the buyers object if I delay settlement a few days until this is resolved? Penalty is $1,400 and we're already selling at a loss.

Thank you!What is the name of your state?

Yes, a prepayment penalty can be assessed on ANY prepayment that is outlined in their mortgage docs. The terms of the prepayment penalty would have been oultined in the terms of the mortgage that your late father selected when he chose this loan program. You CAN request a copy of the loan docs and review the terms that dad agreed to. As to whether you would be in violation of the sales contract by delaying that long, none of us would know without reviewing YOUR accepted offer.

However, it should not take more that a half hour or so, if that, to review the prepay clause. Contact the lender or title company and ask for a copy of the clause in dad's mortgage. The title company can likely just email it to you. You can know if the lender is being straight with you within a half hour from now.

[po'girl]

Thanks to you both. A new wrinkle! I got a copy of the payoff in writing and they're not calling it a PPP they're calling it an "account closing fee" What a joke. Still makes sense to review the full docs that were signed, so finance company is supposed to fax tomorrow. Thanks again!

p'g

[danno6925]

Originally Posted by po'girl

Thanks to you both. A new wrinkle! I got a copy of the payoff in writing and they're not calling it a PPP they're calling it an "account closing fee" What a joke. Still makes sense to review the full docs that were signed, so finance company is supposed to fax tomorrow. Thanks again!

p'g

If that fee is not agreed to in the original docs, it's invalid. A prepayment penalty needs certain nomenclature in order to be valid in some states. Again, that Turth In Lending statement will carry a lot of weight, since it's one of the primary disclosure forms used by lenders. Good luck - stick it to that lender if you can!!!