[jholzknecht]

from Cheryl Nakashige to Everyone:
For our HELOCs we pay most of the closing costs for the borrower; they will be required to pay the costs back if they pay off the loan in three years. Is this considered a prepayment penalty and then be considered a high-cost mortgage? If so, what would be the resolution such as discontinuing this practice?

from Whitney Fuller to Everyone:
For Cheryl’s situation, I thought if it was within the first three years and is a waived bona fide third party charge on an open end credit plan, it is not a prepayment penalty…on page 16 of training manual…I am confused…

Answer: A waived fee that is imposed in the event of prepayment is generally a prepayment penalty; however if the the waived fee is imposed during the first three years after consummation or account opening it is not a prepayment penalty for purposes of the High-Cost Mortgage Loan rules.

Cheryl – Thanks for the original question.
Whitney – Thanks for keeping me on track with the answer.

from Cheryl Nakashige to Everyone:
What are the penalties if we accidentally made a high-cost mortgage loan?
Answer: If you make a High-Cost Mortgage Loan but fail to require the borrower to obtain homeownership counseling, fail to deliver a Section 32 Disclosure, fail to adhere to the limitations or fail to avoid the prohibited acts or practices the borrower can sue and recover actual damages and other costs, regulators may impose civil monetary penalties and your liability under rescission rules may increase.

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