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Prepayment Penalties Block the Way to Refinance
Slumping home values has made these mortgage refinances impossible. A mortgage that was leveraged to the hilt three years ago simply won't be rewritten if its home's value has decreased. As a result, subprime borrowers are locked into the loans. Some have the means to wait out the prepayment penalty. Some do not. Either way, the higher rates will have a profound impact on their monthly finances. Prepayment penalties are playing a large part in the subprime loan crisis. However, the blame shouldn't fall entirely on the lenders who created the fees. Consumers need to take responsibility for their own actions. Not only should they be careful not to borrow too much of their equity, but they should pay close attention to the specifics of their loans-especially the potentially back-breaking prepayment fee.