---
kind: "section"
citation: "24 C.F.R. § 242.37"
title: "24"
number: "242.37"
heading: "Mortgage prepayment."
url: "https://uscodex.org/cfr/24/242.37"
---

# §242.37. Mortgage prepayment.

- (a) **Prepayment privilege.** Except as provided in [paragraph (c)](#c) of this section or otherwise established by HUD, the mortgage shall contain a provision permitting the mortgagor to prepay the mortgage in whole or in part upon any interest payment date, after giving the mortgagee a 30-day notice in writing in advance of its intention to so prepay. The 30-day notice may be extended with the prior written approval of HUD.
- (b) **Prepayment charge.** The mortgage may contain a provision for such charge, in the event of prepayment of principal, as may be agreed upon between the mortgagor and the mortgagee, subject to the following:
  - (1) The mortgagor shall be permitted to prepay up to 15 percent of the original principal amount of the mortgage in any one calendar year without any such charge.
  - (2) Any reduction in the original principal amount of the mortgage resulting from the certification of cost, which HUD may require, shall not be construed as a prepayment of the mortgage.
- (c) **Prepayment of bond-financed or GNMA-securitized mortgages.** Where the mortgage is given to secure GNMA mortgage-backed securities or a loan made by a lender that has obtained the funds for the loan by the issuance and sale of bonds or bond anticipation notes, or both, the mortgage may contain a prepayment restriction and prepayment penalty charge acceptable to HUD as to term, amount, and conditions.
- (d) **HUD override of prepayment restrictions.** In the event of a default, HUD may override any lockout, prepayment penalty, or combination of penalties in order to facilitate a partial or full refinancing of the mortgaged property and avoid a claim.

## Notes

### Authority

Authority: 12 U.S.C. 1709, 1710, 1715b, 1715n(f), and 1715u; 42 U.S.C. 3535(d).

### Source

Source: 72 FR 67546, Nov. 28, 2007, unless otherwise noted.