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Price improvement with Prepayment Penalty for Carrington Flexible Advantage & Investor Advantage transactions

January 18, 2019

Overview

Beginning Thursday, January 17, 2019, Carrington Mortgage Services, LLC (CMS) will permit prepayment penalties to be charged on Investor Advantage, Carrington Flexible Advantage and Carrington Flexible Advantage Plus non-owner-occupied, investment property loan transactions. Prepayment penalties may only be charged when permissible by State law. The prepayment term may be three years, two years, one year or no prepay.

Pricing Prepayment Penalty Options

The Base Price is improved to reflect the three-year Prepayment Penalty.
Borrowers can opt for a two-year, one-year, or Buy Out the Prepayment Penalty by adjusting the price as shown on the Rate Sheet.

State Restrictions

Prepayment Penalties are prohibited in Alaska, Delaware, Illinois, North Carolina, New Jersey, Vermont, Virginia, West Virginia and Wisconsin.

Disclosure Requirements

The following disclosure requirements apply to loans with a prepayment penalty:

  • A Business Purpose Affidavit must be executed at Closing.
  • State Specific Disclosures - two Prepayment Penalty Disclosures have been developed.
    • State Specific Prepayment Disclosure for use in Colorado, Idaho, Minnesota, Montana, Rhode Island and Wyoming.
    • Multistate Prepayment Disclosure for use in the remaining states.
  • If a prepayment penalty is added after a Closing Disclosure (CD) has been issued a new three (3) day waiting period will apply.

State Specific Requirements

State

Prepayment Requirements

Maryland

Permissible for loan amounts greater than $75,000 but subject to the same limitations prior to June 1, 2008 (see below)

Prior to June 1, 2008:

Permissible on loans with interest rate of 8% or less within the first 36 months (3 years) not to exceed 2 months’ advance interest on the aggregate amount of all prepayments made in any 12-month period in excess of 1/3 of the original loan amount.

Minnesota

Loan Amount must exceed Conforming Loan Limits

Ohio

Permissible for loan amounts greater than $89,261 (as of 01/01/2018) within the first 60 MONTHS. Penalty may not exceed 1% of the original loan amount.

PROHIBITED (on 1st  and 2nd liens):

·      If refinanced is made by the same lender or an assignee.

·      If loan is paid off in full as a result of sale of the property.

·      If loan is paid off in full using the borrower’s life insurance proceeds or proceeds from a property insurance claim.

Resources

Refer to the Investor Advantage Program and Carrington Flexible Advantage Program guidelines and matrices for the applicable prepayment penalty requirements.

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