Eliminating pre-payment penalties would raise rates for everyone. If banks can't get a good estimate on their return, they'll take an average percentage of loans that are paid off early and increase everyone's rates to offset the loss in prepayment penalties. Most don't charge them anyway. It beguiles me that some believe that businesses eat costs imposed on them by the government. The real way to lower rates is to kill S-O and do away with federally insured money all together.
6th, you're answer is contradictory.
First of all, most pre-payment penalties were what were called "soft prepays" 6 months interest and that was only if you refinanced within no more than 1- 3-or 5 years. You also could make additional payments to principle if you like with a maximum amount.
States like NY have strict regulations about prepayment penalties, as does the OCC. (office of the comptroller who regulated federally charted Banks)
Also, most if not all, subprime lenders offered a base rate, then if you wanted to take the pre-pay penalty off, you could do so with a slight rate increase. (do you think anyone did this? :roll: )
A decision should have been made by the consumer and the Lender whether they thought that they would be able to refinance into a traditional mortgage before 3 years. Quite a few SP lenders even offered 1 year pre-pays.
There used to be a "few" banks that offered traditional mortgages with a 3 or 5 year penalty with a slight decrease in rate about .25%, but those people had no issues refinancing those. They had good credit and equity in their homes and they were offered in states with low closing costs.
When mortgages are sold on the secondary market, you don't mix apples with oranges, so traditional mortgages are not sold with subprime, or Alt-A.
So IMO, Hillary is look for the "woe is me vote group" the few folks who may have had subprime loans or exotic ARMs in the past 3 years who can't refinance because they have no equity.
The same group who didn't bother reading any disclosures, or didn't think to have their docs reviewed by an attorney for reasonable $500-1200 they charge. NYS is an attorney State, so you can't even get a contract completed without obtaining counsel. Refinances, most people came to closing without them, but the Bank attorneys were very good at explaining docs to the Borrowers, not to mention that there is a 3 day legal recission period on refinances of which docs could be reviewed and the loan rescinded at no costs to the Borrower.
I can't watch it, what is it?
