Looking for answer to a legal question

[Guest justme]

I know this really has really has nothing to do with this board, but, I thought there might be a lawyer or legal eagle out there on New Jersey Law. I was always under the impression and have always been told that by NJ Law, a bank cannot charge a prepayment penalty on a mortgage or home equity loan. I've now been informed by my bank that they are now charging a 3% prepayment penalty on their home equiy loans, that they know of no such law. This was a recent merger which is quite common in banks today with an out of state bank. Would anybody be able to shead any light on this subject?

[Guest knowland]

Odd that so many people felt like putting in their two cents even though they don't know the answer to your question.

 

The answer is, New Jersey does have a statute that bars prepayment penalties for mortgage loans, but in 2000 a federal court in New Jersey held that this statute is pre-empted by the federal Alternative Mortgage Transaction Parity Act that allows prepayment penalties in certain situations. Your loan could be one of those situations, and the only way to know for sure is to take your loan documents to a lawyer familiar with real estate financings and let him review them. You can't expect your mortgage lender to provide you with unbiased legal advice, so there's no point in asking them.

 

The people who said you can't be charged a penalty if the loan agreement you signed doesn't provide for that are right, but it's very unlikely your lender would assert a penalty if the agreement didn't have that provision so that's not much help. Take the documents to a real estate lawyer to find out if your loan qualifies under the AMTPA.

[Guest Thunderbuns]

I don't know squat about NJ law - but it would seem to me that the whole issue of prepayment penalties would have been spelled out in detail in the original mortgage document. If it isn't in there, they shouldn't be able to charge it. If it IS in there, then whatever it says governs the situation!

 

Thunderbuns

[Guest JustANametoPlay]

Your best bet is to call your states Banking commision.

 

However, as already stated, you should first see if your contract allows such a fee. If it doesn't the new bank in general can't charge you although your contract probably has a clause taht states the bank has a right to change terms etc.

[Flower]

>I know this really has really has nothing to do with this

>board, but, I thought there might be a lawyer or legal eagle

>out there on New Jersey Law. I was always under the

>impression and have always been told that by NJ Law, a bank

>cannot charge a prepayment penalty on a mortgage or home

>equity loan.

 

While I cannot speak directly to NJ law, check your ORIGINAL home equity loan papers--any such prepayment penalty, even if legal in NJ, must be part of the contract that you signed, although admitedly, there's probably about 50 pages of "legaleze" that you would have waded through at the signing and could have easily overlooked--but if it is not there, then you are not obligated regardless of "policy" or "recent mergers" etc. It is strictly a matter of contract--either you agreed to it or you didn't and if you didn't then you don't have to pay it even if state law allows such a prepayment penalty.

 

IF YOU DID, on the otherhand, agree to it, even unintentionally, then if there is such a state law, you still may be able to avoid it, but I can't answer that question--maybe someone else familiar with NJ law can.

 

One other point, there may be a distinction between no prepayment penalty on the original mortgage vs on a home equity loan--This would be a quick and easy question for a NJ real estate attorney and I'd encourage you to consult one if you are looking at having to pay a substantial prepayment penalty as the alternative. IMHO :+

 

Also, the above advise and anything else you get on the board, although well intentioned, should not substitude for face to face advise from a real estate attorney knowlegable in NJ law--Such a simple question shouldn't take but a few minutes and thus shouldn't cost a lot.

 

Flower :*

[Guest Thunderbuns]

although your contract probably has

>a clause taht states the bank has a right to change terms

>etc.

 

This would definitly NOT be legal. If the bank has the right to change the terms, what good would the original contract be? NIL!

 

Thunderbuns

[Guest Thunderbuns]

In Canada, the norm for a pre-payment penalty is:

Three months interest OR the interest differential for the balance of the loan - WHICH EVER IS HIGHER.

 

Thunderbuns