Recently a number of customers have called to inquire into why their Georgia prepayment penalty forms are not populating correctly when they enter a prepayment penalty period greater than 24 months. These customers have been entering 36-month prepayment penalty periods.

DocMagic, Inc. defaults to a 24-month prepayment penalty period in order for DocMagic's Georgia high cost test to function properly. As mentioned in the high cost memo, under the Georgia Fair Lending Act (GFLA), points and fees are defined to include, among other things, the maximum prepayment fees and penalties that may be charged or collected under the terms of the loan documents. For purposes of DocMagic's high-cost home loan analysis and determination, DocMagic assumes that if the loan provides for a prepayment penalty, the maximum prepayment fee or penalty is equal to the maximum permissible prepayment fee or penalty permitted under the GFLA, namely (i) two percent (2%) of the amount prepaid in the first 12 months; and (ii) one percent (1%) of the amount prepaid in the second 12 months.

Thus, the prepayment penalty documents for Georgia loans default to a 24-month prepayment penalty period, with a prepayment penalty of two percent (2%) of the amount prepaid in the first 12 months; and (ii) one percent (1%) of the amount prepaid in the second 12 months. Customers desiring to use a 36-month prepayment penalty period must contact Customer Service to request the prepayment rider (gapr2.ppf) and prepayment addendum (gapatn2.ppf) that provide for a tiered prepayment penalty of 3% for the first 12 months after loan closing, 2% for the second 12 months, and 1% for the third 12 months after closing. However, these customers must be aware that use of these prepayment penalty forms will cause the Georgia high cost test to not function properly because of the prepayment penalty assumption that DocMagic makes, as described above. These customers will have to perform their own Georgia high cost test calculations. If you have any questions concerning the contents of this article, please contact DocMagic's Compliance Department.