The Prepayment Code field displays a code indicating the prepayment penalty (if any) for the customer loan account (as entered on the Prepayment Penalty tab on the Loans > Account Information > Account Detail screen). If the loan has a prepayment penalty, and the customer pays off the loan during that time period, the Adjustments tab will indicate the penalty amount owed according to the calculation code specified in this field. ARM loans (payment method 7) use the loan accrual rate instead of the loan interest rate.
When the payoff is processed (on the Post Payoff tab) and the prepayment penalty/minimum interest amount is collected, the system deposits (or in some cases refunds) that amount into the Pre-Payment Penalty or Minimum Interest G/L account set up on the GOLD Services > General Ledger > G/L Account By Loan Type screen.
Possible codes in this field are as follows:
| CODE | DESCRIPTION OF PREPAYMENT PENALTY CODE |
| 1 | Six months interest (loan balance x loan rate ÷ 2). |
| 2 | Ninety days interest (current loan balance - 20% of original loan balance x interest rate ÷ 4). |
| 3 | Six months interest on adjusted balance (loan balance - 20% of original loan amount x loan interest rate ÷ 2). |
| 5 | Remaining principal balance minus 20% of original loan amount x 1% for first 5 years of the loan. (Uses the Date Opened and Original Balance on the Loans | Account Information screen.) |
| 10 | 120 days interest on (current loan balance - 20% of original loan balance x interest rate ÷ 3). |
| 11 | Charge $300.00 if a loan pays off within 24 months of Date Opened field. |
| 12 | Charge $500.00 if a loan pays off within 24 months of Date Opened field. |
| 13 | Charge of 1% principal balance if a loan pays off within 12 months of Date Opened. |
| 14 | Charge $350 if a loan pays off within 60 months of the Date Opened field. |
| 15 | Charge $500 if (same as 14). |
| 16 | If the loan pays off within 24 months of the Date Opened field, the penalty is $500. |
| 17 | 2% of original balance if it is in the first three years. |
| 18 | 1% of current balance if it is in the first three years. |
| 19 | 2% of current balance if it is in the first two years. |
| 20 | 2% of current balance if it is in the first five years. |
| 21 | 1.5% of current balance if it is in the first year. |
| 22 | 2% of current balance if it is in the first nine months. |
| 23 | 1.5% of original balance if it is in the first three years. |
| 24 | 2% of original balance if it is in the first five years. |
| 25 | 2% of original balance if it is before the maturity date. |
| 26 | 1% of current balance if it is in the first two years. |
| 28 | 3% of current principal balance. |
| 29 | 2% of current balance if it is in the first three years. |
| 30 | User-defined calculations (Refer to the Prepayment Penalty tab on the Account Detail screen for instructions.) |
| 61 | A minimum interest charge will be collected if the interest collected in the past two years is less than the lesser of $75.00 or 10% of the original balance. The Minimum Interest field will display the lesser of $75.00 or 10% of the original balance minus the interest collected in the past two years (POACIN + LNPVTD + LNYTDI). The description on the Payoff screen and on the payoff quote will say “Minimum Interest” rather than pre-payment penalty. |
| 62 | A minimum interest charge will be collected if in the past two years the interest collected is less than: |
| • $25.00 if the original balance is less than or equal to $1,000.00 |
| • $50.00 if the original balance is greater than $1,000.00 and less than or equal to $2,000.00 |
| • $75.00 if the original balance is greater than $2,000.00 |
| 63 | 2% of principal balance minus insurance refund minus interest refund (rule of 78s) if paid in full within first 36 months of term. |
| 64 | 2% of principal balance minus insurance refund minus interest refund (rule of 78s) if paid in full within first 60 months of term. |
| 65 | 3%, 2%, or 1% of balance minus mandatory refunds if paid in full within first 12, 24, or 36 months of term (rule of 78s), respectively. Mandatory refunds are any that would show on the payoff quote; i.e., insurance, interest, finance charge, amortization fees, etc. |
| 66 | Use this code if your institution does not charge prepayment penalties but instead charges a release fee at payoff time (when the origination is secured by a mortgage or deed of trust). This code changes the description of relevant CIM GOLD fields (and history) to reflect that the specified charge is a Release Fee and not a Prepayment Penalty fee. |
| 80-120 | User-defined (no automatic calculations performed). Use codes 80 - 120 for any purpose your institution wants. |
* Codes 6, 7, 8, and 9 are the same as Code 5 except the percent changes.
If a loan account has a Prepayment Code of 80-120, the message “PREPAYMENT PENALTY MAY APPLY” will appear at the bottom of the screen. If Institution Option CPRP is set and the ?Renewal/Pro-rate field is marked, all prepayment penalties will be cleared from the payoff.
Reporting Penalties as 1098 Interest
If you want this penalty to be reported as 1098 interest at year-end, enter “pre-payment penalty int” in the Description field. If you do not want the penalty amount to be reported, enter “prepayment penalty fee” (or a similar description).
Action Code 36
If action code 36 (Stop Date for Prepayment Penalty) and afterhours update function 88 are set up for a loan, the prepayment penalty code will automatically be removed on the night of the action date.
