Question

A loan may also be a high-cost home loan if it provides for a prepayment penalty more than ________ months after consummation or a prepayment penalty that exceeds, in total, more than 2% of the amount prepaid.

A) 3
B) 6
C) 12
D) 24

Answer 1

A loan may be considered a high-cost home loan if it has a prepayment penalty that is more than 24 months after consummation or if the prepayment penalty exceeds 2% of the amount prepaid.

Step-by-step explanation:

A loan may also be considered a high-cost home loan if it provides for a prepayment penalty more than 24 months after consummation or a prepayment penalty that exceeds, in total, more than 2% of the amount prepaid.

This means that if a loan has a prepayment penalty that is greater than 24 months after the loan is taken or if the prepayment penalty amount exceeds 2% of the prepaid amount, it is considered a high-cost home loan.

For example, if the loan amount is $100,000 and you decide to pay off $10,000 of the loan early, the prepayment penalty cannot exceed $200 (2% of $10,000) for it to be considered a high-cost home loan.