For these loans, therefore, the Board concluded that the injuries caused by prepayment penalty provisions outweigh their benefits, and we did ban them for these loans – specifically, loans in which the principal-and-interest payment can change within the first four years.
With respect to subprime loans structured to have longer expected life spans, however, the Board concluded that the potential for harm from prepayment penalties is lower relative to potential benefits, warranting restrictions but not a ban.