Principles of Finance Real Estate, Essay Example

The prepayment penalty is not finance charge due to its meaning. The prepayment fee does not qualify as any of the following items

1. Broker charges.
2. Premium ensuring against default.
3. Credit report fee.
4. Loan origination or broker’s fee.
5. Service charge.

The finance charges must be paid by Ms. Halbert and are charged by Fremont. The prepaying penalty of $4,528.89 is attached to the original New Century loan. The prepayment penalty does not fulfill the requirements of a finance charge. The prepaying penalty is connected to the refinancing obligations from the Freemont Loan for the satisfaction of the New Century loan. The prepaying penalty applies to the early payoff of the New Century loan. The prepaying penalty is not included in receiving the money from Freemont. In reviewing the case, several of the financing fees in the Freemont Loan include $300 that was remitted to Jones for the notarizing of Halbert’s signature, in addition to the $15,022.50 in loan brokerage charges from CREIL. The prepaying penalty is not a finance fee on the Freemont loan.

The advice to Halbert is not to use the Freemont Loan to satisfy the New Century loan. The reasons are:

1. The brokerage firm, CREIL overstated Ms. Hilbert’s real income. CREIL stated that Ms. Hilbert earns $4800 monthly.  Actually, Ms. Halbert’s income is $1, 137.00 per month. CREIL overestimated Ms. Halbert’s property by $25,000. Consequently, Ms. Halbert would be approved for the Freemont loan. After several months, Ms. Halbert could go into default.
2. The Freemont loan costs too much. The Freemont loan would cost Ms. Halbert more in notary fees and brokerage fees. Her monthly payments would increase.