Legal Question in Real Estate Law in Illinois

Early payoff penalty

I have an 80/20 ARM on my home. My husband works in another town and the company that I currently work for is possibly closing down. Because I have the higher salary, this could create a hardship for my family. My question is, are early payoff penalties legal in Illinois? I have been told both ways-yes and no. I would like to sell my home that I have just purchased in Jan.05 to be closer to my husbands job and to be closer to where I will be looking for other employment. Is there any other way to sell my home and escape the $8,500 EPP that I have been told I'll have to pay. I do not want to make a profit, I just want to break even steven. My home has appraised for $14,000 over the selling price, and we are in such a small town I am afraid to ask $160,000 just to cover the EPP. I need to sell and I was wondering if there are any ways to get around the EPP-like claiming hardship or something. I have also been told that there is a cap to how much companies can charge in EPP depending on what state you live. Can you please help??

Thanks,

--name removed--Mathis


Asked on 8/28/05, 1:01 pm

1 Answer from Attorneys
Thomas Moens Moens Law Offices, Chartered

Re: Early payoff penalty

The Federal Alternative Mortgage Transaction Parity Act generally allows prepayment penalties, even if there is a state law which prohibits them. There are a couple things you might try. First, if you are using a real estate agent, you can negotiate the commission. Second, you could try selling it on your own (for sale by owner or FSBO), but be aware that this will be quite a bit more work for you, and make sure you get a real estate attorney to help you, right from the beginning. Third, you may be able to negotiate what is called a short sale with the lender. This is where they accept less than what is due, rather than have to foreclose the mortgage. Generally, this is not something which they will discuss with you until you have a firm offer on the table. By no means are they obligated to accept a short sale, but many will, rather than end up with the property. Make sure your agent or attorney is aware that this is what you will be doing, and that they make your purchase agreement contingent on this. We would be happy to assist you in any of these suggestions. Good luck.

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Answered on 8/29/05, 10:20 am


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