As a result of Ohio SB 185, the permissible prepayment penalty provisions in Ohio have been revised effective for loans closing on or after January 1, 2007, as follows:

1. With respect to first lien loans, a lender may impose a prepayment penalty for prepayments made within the first five (5) years not to exceed one percent (1%) of the original principal amount of the loan. However, no prepayment penalty is permitted for loans less than $75,000 if the loan is made or arranged by a mortgage broker, loan officer or nonbank mortgage lender. The $75,000 prepayment threshold is subject to annual adjustment on the first day of January based on changes in the consumer price index.

2. With respect to junior lien loans, a lender may select between two prepayment penalty options:

(a) Option A: A lender may impose a prepayment penalty for prepayments made within the first five (5) years not to exceed one percent (1%) of the original principal amount of the loan provided the loan is made by a different lender; and

(b) Option B: If the loan is prepaid in full within two (2) years, a lender may impose a prepayment penalty charge of two percent (2%) if prepaid in year one and one percent (1%) if prepaid in year two.

(c) With respect to junior lien loans, the DocMagic software will default to Option B.

DocMagic's detailed prepayment penalty article has been updated to reflect these changes. Click here for the detailed prepayment penalty article.

Please contact the DocMagic Compliance Department if you have any questions or comments.