Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: smolejv@gmx.net who wrote (33642)	5/14/2003 12:24:56 AM
From: EL KABONG!!!	Read Replies (1) of 74559

DJ, If the original mortgage had a prepayment clause in it that accounted for the future "lost" revenues (interest to the mortgagee), then your observation would be correct. Most (but not all) mortgages in the USA do not contain a prepayment clause. Therefore, all a borrower need do is to borrow enough money from Peter (the new lender) to pay off Paul (the old lender). Usually a title company or a lawyer will handle most of the details to ensure legalities, and to ensure that Paul is indeed paid off in a timely manner. It is the lender that assumes most of the risks on mortgage loans within the USA, including the risk of prepayment. Prepayment clauses, and accompanying prepayment penalties, do exist, just not to the extent that they used to. Most people I know (including me) wouldn't accept a mortgage from a lender that insisted upon a prepayment clause. KJC

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