Issue For Gulf Coast Lenders: How ToHandle Prepayments

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NEW ORLEANS - (01/02/06) First, there was the issue of whatwould happen when all those loan payments deferred due to HurricaneKatrina all came due on Dec. 1. Now the question is what happenswhen lenders get more than they bargained for in the form of earlypay-offs. Insurance checks have been streaming into Gulf Coastfinancial institutions, and many of those checks will be used topay off loans well before their terms are up. Financialinstitutions in the Gulf Coast states are reporting that in mostcases, they are opting to waive the prepayment penalties built intomost loans. But some consumers have been complaining to regulatorsand other government officials that some financial institutions areinsisting on collecting such penalties for earlypayoffs.

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