Pay your mortgage early to avoid high interest costs and you may still owe more money. While all of your records may indicate you have paid the principal balance in full, your mortgage company may still charge you a penalty fee. Deep within the mortgage loan document is a clause which differentiates mortgages from other types of loans— a pre-payment penalty. Many homeowners never know of its existence until it is too late. We must abolish this penalty for owner-occupied homes because of its inherent unfairness.

Pre-payment penalties are common with risky or sub-prime mortgages, also known as “Pre-payment Penalty Mortgages” (PPMs).  A PPM requires borrowers to pay a fee if the borrower pays all or a part of the loan ahead of schedule. Generally, this requirement exists if borrowers repay in full within the first three years. This discourages many borrowers from refinancing at a lower rate.  Moreover, many homeowners are unaware they have signed a PPM.  While the lack of disclosure is troubling, the basic idea behind PPMs is even more disconcerting.  An industry practice that penalizes good behavior is absurd. Congress must end PPMs on a homeowner occupied property and I will fight for that result.

Allowing industries to balance their books on the backs of hardworking Americans must cease. Given the current unparalleled housing crisis, Congress must continue to advocate for fairness and transparency in lending. The U.S. House of Representatives passed the Mortgage Reform and Anti-Predatory Lending Act of 2009 which was a step in the right direction. Congress must now eliminate Pre-Payment Penalty Mortgages to return fairness and transparency to lending.