1975, December, Pg. 2330. On the Soapbox.

4 Colo.Law. 2330

Colorado Lawyer

1975.

1975, December, Pg. 2330.

On the Soapbox

2330Vol. 4, No. 12, Pg. 2330On the Soapbox"And We've Shared A Lot of Laughs Along the Way"

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A Paraphrase of a Savings and Loan Commercial

The purpose of this column is to assist attorneys representing buyers in real estate transactions to reduce the number of times they are forced to smile when explaining the various charges assessed by savings and loan associations at closings. (An occasional smile is, of course, irrepressible unless the lawyer has no more comprehension of the closing statement than the client, in which case the closing will usually be pervaded by a sense of gloom.)

Some of the troublesome areas are familiar to us all. It is, for example, difficult to explain to a client who has just paid a savings and loan association 2 percent of the total amount of his loan for the privilege of using its money that a prepayment penalty charged by the lending institution if the borrower wants to repay the money borrowed sooner than the lender expected. The uninformed find it hard to understand why, if one returns something one borrowed sooner than the lender expects, the lender is rewarded for this diligence instead of oneself.

About all you can tell the client is that nothing is more important to the savings and loan institution than that all payments be made in the rhythmic pattern prescribed by the note. The borrower then believes, not unreasonably, that the most important thing in the world is for him not to deviate in the slightest from the monthly payments called for by the note.

Pondering this, as the thoughtful borrower will, he will decide on the spot that if he ever sells his house, he will try to find someone who will assume his loan in order not to disrupt the tranquility of the lender. It is to the borrower's great surprise, therefore, that you now explain to him that there is something called an acceleration clause in virtually every note and deed of trust which guards against a borrower giving to the savings and loan the very peace of mind which the prepayment penalty clause seems to insist upon. That clause tells the borrower that if he sells the house to a loan-assuming buyer, the lender has the option of demanding that the loan be repaid even though just a moment ago it seemed as if that was the last thing it...