428.207 Prepayment.

(1) A customer may prepay a covered loan at any time without penalty if the payment is made in the context of a refinancing of the covered loan and if the covered loan is held by the refinancing lender. This subsection does not prohibit the servicer of a covered loan from imposing a prepayment penalty, unless the servicer is also the lender and holds the loan at the time of the refinancing.

(2) Any prepayment penalty under this section is subject to all of the following limitations:

(a) A prepayment penalty is permitted only during the 36 months immediately following the date of consummation of a covered loan.

(b) A lender may not include a prepayment penalty in a covered loan unless the lender offers the customer the option of choosing a loan product without a prepayment penalty. The terms of the offer shall be in writing and initialed by the customer. The offer shall be in a clear and conspicuous format and include the following disclosure:

LOAN PRODUCT CHOICE DISCLOSURE

I was provided with an offer to accept a product both with and without a prepayment penalty provision. I have chosen to accept the product with a prepayment penalty.

(c) A prepayment penalty may not exceed 60 days' interest at the contract rate on the amount prepaid on fixed-rate covered loans over $25,000 if the borrower prepays more than 20 percent of the original loan amount within 36 months immediately following the date of consummation of the covered loan.

(d) A prepayment penalty may not be collected on fixed-rate covered loans of $25,000 or less, on adjustable rate loans, or on those fixed-rate covered loans over $25,000 not specified in par. (c).

History: 2003 a. 257.