prepayment privilege

(redirected from Prepayment Clauses)

Prepayment Privilege

The right of a borrower to repay a debt in full before it is due. The prepayment privilege is favorable to the borrower because it relieves him/her of the debt, but it deprives the lender of interest that he/she would have received otherwise. However, some lenders offer the prepayment privilege to encourage potential borrowers to borrow from them instead of their competitors.

prepayment privilege

See prepayment clause.

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Recent decisions relating to prepayment clauses, including EFH and Momentive
Many consumers aren't familiar with prepayment clauses.
Though some California banks have included prepayment clauses with rate discounts on adjustable-rate mortgages for several years, virtually no major lenders in the country routinely have marketed them with fixed-rate mortgages.
Bank of America, San Francisco, interestingly the pioneer of conventional mortgage-backed securities in 1977, has been a leader in experimenting with prepayment clauses to enhance its portfolio return.