Mortgage Prepayment Penalty Is Enforceable

Originally published May 2005

In Davis v. G.N. Mortgage Corporation, 396 F.3d 869 (7^th Cir. 2005) the borrowers challenged a prepayment provision in their mortgage documents based on breach of contract and common law fraud. The challenge was rejected.

In September 1999, Thomas P. Davis and his wife, Cathy M. Davis, obtained a $288,000 adjustable rate mortgage from G.N. Mortgage Corporation (G.N.) to refinance non-business debts and secured the loan with their personal residence in Manhattan, Illinois.

The closing took place at the office of TICOR Title Insurance Company (TICOR) with Patricia Bogdanovich acting as TICOR’s closing agent. At the closing, the Davises were given two stacks of documents, each containing 24 documents and totaling 43 pages. Each stack was represented to contain a duplicate set of documents and to include an agreement for a two-year prepayment penalty which their mortgage broker, Monica Boatman, had negotiated with G.N. The