Early Pay Off Penalties – Six Months Is All We Ask :)

Shockingly, rates have fallen about 1/4% over the last month. We say shockingly because we were told that this time they were going up for sure (after about twenty false alarms over the last eight years). And… once again the Fed seems powerless and the experts were wrong.

Early Pay Off Penalties or EPOs

BUT – that is not the point of this blog. This blog is about Early Pay Off Penalties or EPOs. None of our loans have pre-payment penalties for borrowers. But, almost all loans have EPO penalties that lenders must pay every time a loan is paid off within six months of close of escrow.

These EPO penalties often exceed $10,000 or more and they come right out of our pockets, and they represent a huge and very painful expense for every lender every month. Hence, we ask our borrowers to hold off on refinancing for six months after close of escrow.

We can lock in a new interest rate and refinance as soon as four months after close (with a sixty-day lock), but we can’t fund the refinance until the 180-day mark or we incur an EPO penalty.

I should add that we are also very careful not to pay off other lenders’ loans too early as well. If someone comes to us to refinance and we see that they recently closed their loan with another lender, we will either tell them to wait for the EPO period to run or to go back to the other lender.

Because rates have dropped in recent weeks, we are running into EPO issues again.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167