Here’s an interesting story. I called Indymac, the lender for my home loan. I chose a pay option arm for a few reasons. I understand the loan and use it from an investment perspective under the advise of my CPA and two. But… at any rate, I called to ask what my options were at this point with a about 18 months left on the prepay. I told them I’d like to consider refinancing the loan with them and asked if they would they be willing to work with me on the prepayment penalty. As I suspected, their answer was an emphatic, “No”.
I did the numbers and it simply doesn’t make sense. BUT… what about homeowners that can’t afford the payments when they adjust? They have two choices: 1 – pay 3 or 4 times what they’ve been paying for the last few years; 2. Default on their mortgage and go into foreclosure. Sometimes the loans adjust in the middle of a prepayment penalty. So, what options does a homeowner have when faced with this situation?
This is the most frustrating thing, in my opinion. You’ve got homeowners that listened to their mortgage broker or loan officer, have paid faithfully by the terms they understood (there was a lot of misinformation about these neg-am loans), and then lose their homes because the lenders won’t budge. I realize the banks are in it to make money – and prepayment penalties help that – but don’t you think they’re going to lose a whole lot more when all these loans default?
My opinion is that the loan officers or mortgage brokers need to be held accountable for these prepays because the longer the prepay, the higher the commission. And now… homeowners are paying with their credit, their livelihood and their homes.
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