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[ Follow Ups ] [ Post Followup ] [ The Forum Board ] [ FAQ ] Re: Prepayment penalty, etc. Posted by Ward-CA- on March 12, 2002 at 3:17 PM In Reply to: Prepayment penalty for property in foreclosure posted by Randi on March 12, 2002 at 2:28 AM : Ward, please say you can help me. I've been racing through web pages for 3 hours now! : My husband and I are trying to buy a property that is in foreclosure. The trustee sale has been postponed once already, but the 30 day extension runs out March 20th. There is a $21,000 hospital lien on the property that the selling agent was *supposed* to be taking care of (she was trying to get it removed). She's been telling us for 3 months that the bank would not send a demand and when they finally did send one, it had the prepayment penalty of $9,500 on it. This did not figure into her plans.....or something (she's not the most competent agent)...and now there isn't enough money to go around. She has waited until the eleventh hour for all of this, and of course, my husband and I are the ones that lose out and get stuck with losing all the money. : Various people, including my lender, agent, etc. have said that yes, the bank can charge the prepayment penalty. However, my boss, a private real estate investor, says that there is a section in the California Civil Code that says the lender *can't* charge the prepayment penalty for an owner-occupied residence when the property is in foreclosure. : So, my questions are: Can the lender charge the prepayment penalty? If not, what section says such in the California Civil Code? (I'm presuming that if the lender can charge the penalty, then there is not a code saying they can, it just goes along with the other sections about prepayment penalties). Will counties take pennies on the dollar for hospital liens? If this property goes to auction, will the lien stay with it, or will it be foreclosed upon also? Last, what is the definition of "owner-occupied"? The only definition type-thing that I found was a section that said something about the owner occupying the property within 90 days after recording. : Oh, and one more question...at auctions, do they really require a cashier's check that day? I've been told by a loan officer that she went and bought property at an auction for a buyer that she had approved for a loan--using just their approval as payment. Does this fly? : Please help! : Randi =•=•=•=•=•=•=•=•=•=•= Randi, A lender can charge a prepayment penalty as long as they are just asking for the reinstatement of back payments (during the Notice of Default phase). However when the lender is insisting on a total payoff (like during the Notice of Trustee’s Sale period) then they are not entitled to charge a prepayment penalty since it is the lender who’s insisting on the full payoff. If the hospital lien was recorded, later in time than the foreclosing 1st trust deed, it will be wiped off the title of the property by the foreclosure auction of the 1st. Whether or not the county would take a deeply discounted amount for the lien is problematical. Depends on too many possible variables to expound on right now. The definition of “owner-occupied” describes a situation where the owner of a residence actually occupies the property, rather than a renter or someone else under a contract for deed. It used to be, when I started in the foreclosure business twenty years ago, that you could only buy at auction using cashier’s checks or cash. Since then the payment requirement has been loosened so nowadays you can pay, in addition to cashier’s check or cash, with an official bank check or by money order, or by any other type of check that’s issued by a California depository. Payment at a California trustee’s sale must be made in full, on the spot. The episode you recite concerning the loan officer was probably an auction held by a County Public Administrator, or perhaps a sale conducted via a probate court proceeding. Hope this helps. Follow Ups: Re: Prepayment penalty, etc. Randi 5:30 PM, 03/12/02 (2) Re: Date of recording dictates priority. Ward-CA- 8:51 PM, 03/12/02 (1) Re: Date of recording dictates priority. Randi 10:59 PM, 03/13/02 (0) Post a Followup: Name : E-Mail : Subject : Comments: : : Ward, please say you can help me. I've been racing through web pages for 3 hours now! : : My husband and I are trying to buy a property that is in foreclosure. The trustee sale has been postponed once already, but the 30 day extension runs out March 20th. There is a $21,000 hospital lien on the property that the selling agent was *supposed* to be taking care of (she was trying to get it removed). She's been telling us for 3 months that the bank would not send a demand and when they finally did send one, it had the prepayment penalty of $9,500 on it. This did not figure into her plans.....or something (she's not the most competent agent)...and now there isn't enough money to go around. She has waited until the eleventh hour for all of this, and of course, my husband and I are the ones that lose out and get stuck with losing all the money. : : Various people, including my lender, agent, etc. have said that yes, the bank can charge the prepayment penalty. However, my boss, a private real estate investor, says that there is a section in the California Civil Code that says the lender *can't* charge the prepayment penalty for an owner-occupied residence when the property is in foreclosure. : : So, my questions are: Can the lender charge the prepayment penalty? If not, what section says such in the California Civil Code? (I'm presuming that if the lender can charge the penalty, then there is not a code saying they can, it just goes along with the other sections about prepayment penalties). Will counties take pennies on the dollar for hospital liens? If this property goes to auction, will the lien stay with it, or will it be foreclosed upon also? Last, what is the definition of "owner-occupied"? The only definition type-thing that I found was a section that said something about the owner occupying the property within 90 days after recording. : : Oh, and one more question...at auctions, do they really require a cashier's check that day? I've been told by a loan officer that she went and bought property at an auction for a buyer that she had approved for a loan--using just their approval as payment. Does this fly? : : Please help! : : Randi : =•=•=•=•=•=•=•=•=•=•= : Randi, : A lender can charge a prepayment penalty as long as they are just asking for the reinstatement of back payments (during the Notice of Default phase). However when the lender is insisting on a total payoff (like during the Notice of Trustee’s Sale period) then they are not entitled to charge a prepayment penalty since it is the lender who’s insisting on the full payoff. : If the hospital lien was recorded, later in time than the foreclosing 1st trust deed, it will be wiped off the title of the property by the foreclosure auction of the 1st. Whether or not the county would take a deeply discounted amount for the lien is problematical. Depends on too many possible variables to expound on right now. : The definition of “owner-occupied” describes a situation where the owner of a residence actually occupies the property, rather than a renter or someone else under a contract for deed. : It used to be, when I started in the foreclosure business twenty years ago, that you could only buy at auction using cashier’s checks or cash. Since then the payment requirement has been loosened so nowadays you can pay, in addition to cashier’s check or cash, with an official bank check or by money order, or by any other type of check that’s issued by a California depository. : Payment at a California trustee’s sale must be made in full, on the spot. The episode you recite concerning the loan officer was probably an auction held by a County Public Administrator, or perhaps a sale conducted via a probate court proceeding. : Hope this helps. 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