Legal Question in Real Estate Law in New Jersey

pre payment penalties in new jersey

I bought a house 22 months ago and just refinanced. I had many problems with the lawyer I used for my original closing. I refinanced with Chase bank. They told me that there was a pre pay penalty on my loan with the original lender. I had to pay the original lender roughly 8,000.00 to be allowed to refi my loan. When I called the original lender (Option One) they told me that I did sign a pre pay penalty agreement in my contract at closing. My attorney never informed me of this penalty and rushed me through the closing papers. I was told by other people and by Chase that pre pay penalties are illegal in New Jersey and I should hire another attorney and attempt to recover those pre pay penalty funds that I had to pay when I refinanced. If I backed out of the refi when I learned of this pre payment penalty, I would have had to still pay the new title work fees, the new survey fees and the new appraisal fees that were already done. These were costly as well.

Am I entitled to get these pre-pay penalty funds back since it is ''illegal'' in New Jersey to have a pre pay penalty? When I called Option One, they told me that I would have to take it up with my attorney because that is the contract that I signed. He won't return my calls.


Asked on 5/12/04, 7:24 am

1 Answer from Attorneys
Lawrence Simon Law Offices of Lawrence M. Simon

Re: pre payment penalties in new jersey

Pre-payment penalties are not illegal in New Jersey. Under Federal law, certain times of loans cannot charge pre-payment penalties beyond one year, but for other types of loans, pre-payment penalties apply. The lawyer did not deal directly with the bank in selecting the type of loan, or the interest rate. However, he should not have rushed you through the paper work. You were entitled to have the documents explained to you. This is why you use a lawyer. I suggest you consult a new lawyer that is well versed in this area of the law, and find out whether a pre-payment penalty legally applies to your prior loan, if it doesn't, the bank cannot collect it. If they refuse to provide a cancelled mortgage, they can be held liable for triple (treble ) damages and attorneys fees under the consumer fraud act.

Good luck.

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Answered on 5/12/04, 9:26 am


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