What type of mortgage loan can include a prepayment penalty under federal law?

The inclusion of a prepayment penalty in a mortgage loan is regulated under federal law, specifically through the Dodd-Frank Act. This legislation restricts the circumstances under which a prepayment penalty can be applied.

Fixed-rate qualified mortgages are structured to protect consumers, allowing them to have a clear understanding of the terms and conditions of the loan. While prepayment penalties are either limited or prohibited in certain types of loans, fixed-rate qualified mortgages can still include them under specific conditions as long as they comply with the regulations set forth. These penalties are typically not allowed on loans that don't meet the criteria for qualified mortgages, as the intent is to support fair lending practices and consumer protection.

In contrast, adjustable-rate and variable-rate mortgages generally aim for flexibility and may not have the same level of consumer protection regarding prepayment penalties. Personal loans, while they can have their own terms, do not fit the conventional mortgage guidelines and therefore are not relevant to this question. Thus, the distinction of fixed-rate qualified mortgages is significant as it recognizes the regulatory parameters that exist to safeguard borrower rights while allowing for the possibility of such penalties under regulated circumstances.