Document Type
Article
Publication Date
1993
Abstract
Most mortgages on income-producing real estate (as distinct from owner-occupied housing) contain clauses restricting early payment of the loan. These clauses are highly controversial, and borrowers often resist their enforcement. While other writers have discussed prepayment clauses in the recent legal literature, my objectives in this article are to advance this discussion in three respects: first, to provide an economic perspective on mortgage prepayment as support for a set of legal recommendations; second, to consider whether the bankruptcy of the mortgagor should affect enforceability of a prepayment fee clause; and third, to analyze the cumulative effect of the presence in the same mortgage documents of both a clause imposing a fee upon prepayment of the loan and a clause accelerating the loan in the event of default, sale, eminent domain taking, or hazard insurance payoff.
Recommended Citation
Dale A. Whitman, Mortgage Prepayment Clauses: An Economic and Legal Analysis, 40 UCLA L. Rev. 851 (1993).