Anonymous Posted July 5, 2002 Report Share Posted July 5, 2002 I am about to refinance a subprime mortgage through AAMES Home Loan (I hate 'em!) and after paying on it for 7 years they tell me that there is a $3,000 pre-payment penalty. I thought I heard somewhere that after 60 months of paying on a mortgage you can't be charged a pre-payment penalty... Does anyone here know anything about these things? I know this is not a mortgage board but everyone has been so helpful and knowledgeable that I figured someone here may know the answer. Link to comment Share on other sites More sharing options...
herauntsis Posted July 5, 2002 Report Share Posted July 5, 2002 You came to the right place I am in the mortgage business in California and this question comes up quite often. I don't know if there is a law concerning this, if there is, it probably differs from state to state. What I can tell you is that you are probably bound by the terms of your note, so you need to go back and read that. There is usually a section that is called something like "Borrower's Right to Prepay." Most PPPs that I have seen run for from one to three years, I have never heard of one that runs for over seven years. Also consider this: even though having to pay a PPP after seven years pisses you off, it might be the best thing to do anyway (if you do in fact owe one). What you need to do is figure out how much you are going to save with what I assume is going to be a lower interest rate. Balance that against how long you think you are going to own this home. What you want to know is what period of time is it going to take for the savings to pay for the costs? For example, say you are going to save $200 per month and the TOTAL cost of the loan (including PPP) is $5000, then it will take 25 months for the savings to pay the costs. If you think you will only own this home for another two years, then it doesn't make any sense for you to refi. This is not cut and dried; if you are refinancing to pull cash out to pay off higher interest credit cards, then also consider how much you are saving that way, plus the tax advantages. If you just lost your job and really need to lower your payments, then maybe the cost of the loan is not an issue. Whoever you are getting the loan from should help you figure out this kind of stuff and advise you on what is the best thing for you to do. Beware though -- the mortgage business is filled with sharks and often they will advise you to do what is best for them, not you.I hope this helps Link to comment Share on other sites More sharing options...
Anonymous Posted July 5, 2002 Author Report Share Posted July 5, 2002 Oh thank you! I am SO glad someone was able to help me. Can I please ask you one more question? My mortgage broker is trying to force me to refinance with Ocwen Fed. Bank but I have heard some very bad things about them on one particular web-based consumer's complaint board. Do you happen to know anything about them? Is there another ethical sub-prime lender you would suggest? I am trying to avoid the 'sharks' you referred to. Thanks a million!!! Link to comment Share on other sites More sharing options...
herauntsis Posted July 6, 2002 Report Share Posted July 6, 2002 I don't know anything about that particular lender. I would beware of a mortgage broker who is trying to "force" me into something that is making me uncomfortable. And I think that the term "ethical subprime lender" is probably an oxymoron.If I knew more about your situation, I would be better able to help you. If you would like to continue this discussion privately, please email me at Herauntsis@AOL.com. If you don't mind continuing here, that would be great too, someone else might learn something that would help them as well.I can't help you figure out where to go unless I know where you are now. What is the reason for going subprime in the first place? Is it your credit scores, or your ratios, or a problem with the property, or have you had a BK or foreclosure or what? Even if there are problems, there are sometimes other ways to go than subprime, especially if you have a lot of equity in your home. With subprime, you usually get a horrible loan that costs way too much, and I really hate to see people do that.If you describe your situation, I maybe can steer you to a better solution than a subprime loan. Link to comment Share on other sites More sharing options...
Anonymous Posted July 6, 2002 Author Report Share Posted July 6, 2002 Thanks so much. I sent you an e-mail since I didn't want to completely embarass myself by stating my credit scores and household income here. Link to comment Share on other sites More sharing options...
Anonymous Posted July 8, 2002 Author Report Share Posted July 8, 2002 I have a question for you --We are trying to get a mortgage we currently have a wrap around mortgage we pay the investor that owns the house 1300a month he use 650 of that towards rent and theother 650 is has put away for usto use as a downpayment. We have approx 15,000 for a downpayment we now want to buy the house from him. he is asking 100,00..But we cannot get approved becasue of our credit...I was told that we need to have all charged off accounts paid. We currently have 3 items that are charged offs all are due to come off in 2003, but 2 of them the sol has expired. I have tried to infor the mortgge people that the sol have expired. But they donot care....I mean i could pay off them with our downpayment money but then we will not have a downpayment..Why are mortgage people so set i had one lady that said i donot care what the sol says... Link to comment Share on other sites More sharing options...
herauntsis Posted July 8, 2002 Report Share Posted July 8, 2002 Lenders usually sell the conforming loans (anything under $300,700) they originate to other lenders and to Fannie Mae and Freddie Mac. Fannie and Freddie set the rules for mortgages they will buy, so if the lender wants to sell to them, the lender has to follow their rules. A lot of the rules don't really make any sense, but there isn't really anything the lender can do about that. The other part of your problem may be that you are putting less than 20% down, which means that you either need mortgage insurance, or a 2nd trust deed to make up the difference. The qualifying rules for 2nd trust deeds are almost entirely driven by your credit scores, which might be a problem. Mortgage insurance can be difficult to qualify for, and they pretty much get to make up their own rules.Has your lender looked into an FHA loan for you? If your credit is clean for the last two years or so, they might be willing to overlook some old charge offs. FHA doesn't pay as much attention to scores as Fannie and Freddie, and will sometimes allow you to explain away bad credit with a sad story (we fell on hard times that were beyond our control, but we are better now, etc.), if, as I said before, your recent credit history is good. Other than that, I can only suggest that you either wait until they fall off your report, or pay them. Unless you absolutely can't avoid it, stay away from subprime lenders, who will rape and pillage you without mercy.I hope this helps [Edit by herauntsis on Sunday, July 7, 2002 @ 10:52 PM] Link to comment Share on other sites More sharing options...
Anonymous Posted July 8, 2002 Author Report Share Posted July 8, 2002 Herauntsis,I wanted to thank you for your helpful response to my e-mail. Unfortunately, I do have some recent 'dings' on my credit so I probably wouldn't qualify for an FHA loan like you suggested. Oh well, I suppose my only real option at this stage of the game is to deal with the sub-prime lending 'wolves', clean up my report and refinance in a couple of years.Anyway, I think your suggestion about having a place where people can ask questions about mortgages is a FANTASTIC idea! Perhaps the Admin here would even consider adding a sub-category for mortgage questions? Since it really is the single biggest purchase of your life and nobody wants to fall victim to a crummy lender. (Thank God Providian doesn't write mortgages!) LOL!!! Link to comment Share on other sites More sharing options...
herauntsis Posted July 9, 2002 Report Share Posted July 9, 2002 I found out a little more about this -- FHA requires only 12 months clean credit, not 24 months. Also, FHA does require any unpaid charge offs or collection accounts to be paid. Sorry about that -- I hate to be the bearer of wrong information. Link to comment Share on other sites More sharing options...
Anonymous Posted July 9, 2002 Author Report Share Posted July 9, 2002 No problem...you should see how often I'm wrong! LOL! Can I ask you another couple of questions about Prepayment Penalties? I just got a copy of the Deed of Trust for the mortgage that my husband and I are paying off (my mom & dad's note) and I can't see anything anywhere that says they have a prepayment penalty. Is it possible it would be hidden in another document? Another question...since the mortgage company that my parent's used for this loan sold it to Aames Home Loan about a year later, but my parent's never signed anything with Aames, is it possible that Aames is lying about having a prepayment penalty on this loan? Am I correct in guessing that Aames couldn't change any terms, after the fact, on a loan that they purchased unless my parent's signed a form authorizing it, right? Could I impose on your expertise and sweet talk you into glancing at this document I have and telling me if I am just overlooking something about a PPP? I could send you the link to view it since the document is imaged online with our County Recorder's office or if you prefer I can even fax it to you. I would really appreciate it but if you are super busy I understand too. By the way, have I said "gracias" for all your help yet? [Edit by ShannonN on Tuesday, July 9, 2002 @ 09:01 AM] [Edit by ShannonN on Tuesday, July 9, 2002 @ 09:02 AM] Link to comment Share on other sites More sharing options...
herauntsis Posted July 9, 2002 Report Share Posted July 9, 2002 Yes, you have thanked me very graciously several times and you are most welcome.Where you need to go to find out about your PPP is the note, not the deed of trust (although sometimes the deed will have what's called a "Prepayment Rider," which would be a separate document "riding" on the deed. Find the end of the actual deed, and then look at any pages which follow.). Unfortunately, the note is not a recorded document, so if your parents don't have a copy of it, I don't know what to tell you other than to try to get a copy of it from the lender If you can get a copy, look for a section that is headed something like "Borrower's Right to Prepay." I would be willing to take a look at it for you if you can get your hands on it.Fortunately, mortgages are not the same as credit cards, and just because the loan gets sold does not mean that the new holder gets to change the terms at their whim. It is possible that they are lying, or even just mistaken about the PPP. For some reason, 9 out of 10 not-too-bright people who work for lenders usually end up in the loan servicing department, so it's quite possible that they don't know what the hell they are talking about, for whatever reason. I have a hunch that they are wrong, because I have been in the business off and on for almost 20 years, and I have NEVER heard of a PPP that runs for as long as this one purportedly does. That doesn't mean that they don't exist, but it doesn't seem likely.Good luck, and let me know how it goes Link to comment Share on other sites More sharing options...
Anonymous Posted July 9, 2002 Author Report Share Posted July 9, 2002 Sounds good. I'll look and see if I can find that document and if I can't I'll ask Aames to send me a copy and prove to me that there is one...a little like PPP validation? LOL! Thanks again! Link to comment Share on other sites More sharing options...
Anonymous Posted July 10, 2002 Author Report Share Posted July 10, 2002 Rats! I found the Note and sure enough they do have a prepayment penalty in there. I am so mad I could spit! Link to comment Share on other sites More sharing options...
herauntsis Posted July 10, 2002 Report Share Posted July 10, 2002 If it's not too long and tedious, could you post the relevant part? I would be interested to see that -- PPPs work different ways, and I want to make sure that they are figuring it correctly. I still find it hard to believe a prepay that runs that long. Geeze! Let this be a lesson to everyone, when they are getting a home loan, to READ THE TERMS OF THE NOTE before you sign it. Sometimes what the LCSL (Lying Cheating Scum Lender) tells you you are getting and what you are actually getting are not even close to being the same thing. P.S. Also, please let me know what the balance on your loan is. [Edit by herauntsis on Wednesday, July 10, 2002 @ 09:43 AM] [Edit by herauntsis on Wednesday, July 10, 2002 @ 09:45 AM] Link to comment Share on other sites More sharing options...
Anonymous Posted July 11, 2002 Author Report Share Posted July 11, 2002 Thanks. I actually don't have the note here now (I'm at work) but it was something to the effect of having to pay six month's worth of interest on the loan. The balance on the note is about $43K and the house appraised for $125K. Link to comment Share on other sites More sharing options...
herauntsis Posted July 11, 2002 Report Share Posted July 11, 2002 Sometimes the borrower has the right to prepay up to 20% of the balance during any 12 month period. Sometimes the PPP is computed on the entire original balance of the loan. And there are probably other ways to do it that I've never heard of (seems to be a lot of that going around lately). That's why I wanted to be able to read it, to see exactly what they require, and also to see what the time period of the PPP is. Also, I forgot to ask, what is the interest rate on this loan? Link to comment Share on other sites More sharing options...
Anonymous Posted July 11, 2002 Author Report Share Posted July 11, 2002 This post is for herauntsis. I have a question. I am currently purchasing a home from a private owner. I make my payments directly to him/his company. The agreement that I signed is an installment contract that he obviously "borrowed" from another lender that he deals with. Well anyway the contract says that I can prepay without penalty but when I signed I just skimmed all of the pages and asked him directly if I could pay off early and thus saving myself interest, he said no. Well the line states "Prepayment: You can prepay this debt in full or in part at any time without penalty. Accured charges to date of prepayment must be paid at the time of payment. Prepaid finance charges, if any, will not be subject to refund or rebate if you prepay the contract in full or in part."From what I gather is I may pay off early and save interest. Is that what you get from this?And also, the reason I went through him is that I am in the middle of cleaning my credit report and it will soon be good enough for me to acquire a loan. When that happens I would like to get a mortgage and pay the owner off (I'm paying 14.0%). Will I be able to do that without paying all of the interest to him?Thanks for your reply! Link to comment Share on other sites More sharing options...
herauntsis Posted July 11, 2002 Report Share Posted July 11, 2002 If that is the entirety of the prepayment clause, then you can repay the loan without penalty. [Edit by herauntsis on Thursday, July 11, 2002 @ 03:47 PM] Link to comment Share on other sites More sharing options...
Anonymous Posted July 12, 2002 Author Report Share Posted July 12, 2002 Herauntsis,Since we last talked things on my loan have gone from awful to tragic to laughable. Can I e-mail you later today (I have a meeting in about 5 minutes) and pepper you with more questions? I am really confused and angry at my, now former, mortgage broker. I fired his weasle butt yesterday for lying to me. I now need to sort out all the lies from the (if any) truth of what he was telling me and could good use an expert. Thanks again. Link to comment Share on other sites More sharing options...
herauntsis Posted July 12, 2002 Report Share Posted July 12, 2002 Sure thing -- I would be happy to help. I work from noon to 8 PM (west coast time), so I probably won't be able to get back to you until later tonight or tomorrow, ok? Link to comment Share on other sites More sharing options...
Anonymous Posted July 12, 2002 Author Report Share Posted July 12, 2002 That is ok with me, I don't want to get you in trouble at your work. I will compose an e-mail letting you know what is happening now and see what you think...Just let me know your thoughts whenever you have a chance. Thanks again. Link to comment Share on other sites More sharing options...
sisflomi Posted August 8, 2003 Report Share Posted August 8, 2003 This post has some interesting mortgage info. Link to comment Share on other sites More sharing options...
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