Kansas Statutes

• The Kansas Administrative Regulations and the Kansas Statutes Annotated codify the state legislature's efforts to limit prepayment penalties that mortgage lenders can charge Kansas home buyers. In an effort to protect Kansas residents against predatory lenders and deceptive lending practices, the Kansas legislature enacted statutes regulating the types of finance charges mortgage brokers and lenders can charge, and the legal validity of contractual provisions allowing them to charge consumers prepayment penalties.
  
  

Federal Law

• Under the Code of Federal Regulations, the federal Office of Thrift Supervision promulgated federal laws allowing housing lenders to charge unlimited prepayment penalties and late fees. As such, the Kansas statutes prohibiting prepayment penalties on high-value notes (more than 100 percent of the borrower's appraised value of her home) are legally invalid and preempted by the Code of Federal Regulations. Thus, although the Kansas legislature enacted state laws limiting prepayment penalties on first mortgages, its legislative efforts are not legally enforceable.
  
  

Consequences of Preemption

• Since the Kansas Division of Consumer and Mortgage Lending has the legal responsibility to regulate mortgage lenders providing home loans to Kansas residents, the Office of the State Bank Commissioner issued a formal letter to the federal Office of Thrift Supervision acknowledging the state's legislative limitations under federal preemption. The July 5, 2000, letter is still legally valid at the date of publication. However, the federal government would have to amend the Code of Federal Regulations before the Kansas laws could legally curb the use of prepayment penalties by lenders.
  
  

Considerations

• Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.