Here is a letter I sent to Senator Feinstein's office on 8/22/07 in which I identify that a big problem right now is the PrePaymen Penalty imposed by lenders which imprison the borrower from refinancing or selling due to the potential high amount of the prepayment: Here it is:
August 22, 2007
FAX MEMO
From: John Lira, publisher of LatinoHomeBuyer.com
(415) 609-3331
To: Honorable Senator Dianne Feinstein
Washington, D.C. office:
Phone: (202) 224-3841, Fax: (202) 228-3954
RE: Mortgage - remove the prepayment penalties.
Dear Senator: As a professional Real Estate Broker in San Francisco I know that the current mortgage/housing problem is cyclical and not easy to solve. However, the destruction that it is producing in families (especially lower income families) is tremendous.
I write to you after interviewing many clients seeking help with their loan terms. Unfortunately I have had to turn many away for not finding a way out. Most will end up losing their homes due to foreclosure or through short-sale.
However, there is one thing that I do believe is hurting borrowers unjustly: the severe lender's prepayment penalty.
The prepayment penalty prevents individuals from refinancing or selling due to the amount of the prepayment: usually 6 times the monthly interest; which on average is about $18,000 to $26,000 for a $500,000 home (subprime loan rates).
So if the prepayment penalty is removed then it would help some people refinance or sell and not be forced to sell at a loss which hurts them and the lender.
Thank you for your time,
John Lira
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