35 states currently regulate mortgage prepayment penalties, which--at thousands of dollars--can lock homeowners with subprime loans (70% of which have prepayment penalties
) but little equity into devastating interest payments. Tennessee is one of those states, but it only prohibits
prepayment penalties in excess of 2% of the loan amount prepaid during the first 24 months after closing. Tennessee refuses to ban prepayment penalties, which have helped foster the current mortgage default and housing downturn situation.
However, there are 11 states that, according to the Center for Responsible Lending
, "have prepayment penalty bans on broad categories of mortgage loans":
- Minnesota (banned prepayment penalties from the entire subprime market)
- New Jersey
- New Mexico
- North Carolina (banned prepayment penalties from the entire subprime market)
- South Carolina
CRL reports that there is no evidence that consumers feel deprived of "choice" in those states. So, why can't Tennessee get on board, too?
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