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Committee approves bill clarifying prepayment-penalty limits for consumer home loans
Summary
The committee passed HB 2497, which clarifies that no prepayment penalty may be assessed more than six months after executing a note for home loans made primarily for personal, family, or household purposes; members debated potential effects on housing affordability and whether the change would benefit commercial buyers.
The House Committee on Financial Institutions and Pensions voted to pass HB 2497 out of committee after a substantive debate about prepayment penalties and housing affordability.
David (revisor) summarized that HB 2497 would amend KSA 16-207 to specify that no prepayment penalty shall be assessed more than six months after execution of a note evidencing a home loan made primarily for personal, family or household purposes. In the reviser's explanation, loans made for business or investment purposes would remain subject to different treatment under the code.
Representative Shave opposed the bill on affordability grounds, arguing it would advantage investors and flippers competing against families for scarce housing stock. "This bill just goes in the entirely opposite direction," he said, warning that allowing prepayment penalties for non-consumer loans could make it easier for commercial buyers to outbid individual purchasers.
Representative Bridal, citing follow-up information from Rocket Mortgage, said corporations could receive an interest rate about 1 percentage point lower than a noncorporate buyer and presented a sample calculation showing the lifetime interest difference on a $350,000 mortgage could be substantial.
Supporters including Representative Roser and members with commercial-lending experience said the change restores flexibility for lenders and borrowers in the commercial lending context and argued that prepayment penalties are an underwriting tool that can be used to offer lower long-term rates for certain borrowers.
Representative Roser moved that the committee pass HB 2497 favorably; the motion was seconded and carried on a voice vote. The chair announced the motion passed. The transcript records members saying 'aye' and at least one member voicing 'no' during the vocal tally; a numerical roll-call was not recorded in the transcript.
