Which agencies do not allow prepayment penalties?

The answer is accurate because Fannie Mae, Freddie Mac, USDA, FHA, and VA all have regulations that prohibit prepayment penalties. These agencies aim to provide affordable housing options and protect consumers from potential financial burdens associated with prepayment penalties, which can make it more difficult for borrowers to pay off loans or refinance.

By eliminating such penalties, these agencies encourage homeownership and provide flexibility for borrowers who wish to pay down their loans early without incurring additional costs. This consumer-friendly policy aligns with their mission of promoting access to affordable mortgage finance.

On the other hand, conventional lenders and private banks may have varying policies regarding prepayment penalties. State housing authorities are also not uniform in their approaches, and the Federal Reserve and SEC primarily oversee financial institutions and securities, respectively, rather than specifically regulating mortgage prepayment penalties. Therefore, the first choice accurately reflects the agencies that do not impose prepayment penalties, supporting the overall goal of protecting consumers in the housing market.