AWACSMortgage compliance intelligence from Flightline

Pennymac Correspondent · Correspondent Announcement 26-129 · Published

Non-QM prepayment penalties now allowed in Ohio and Michigan, subject to state caps

Pennymac now permits prepayment penalties on its Non-QM programs (A-, A, A+, DSCR) in Ohio for 1-2 unit loans, capped at 1% of the unpaid balance for terms up to 5 years, and in Michigan, capped at 1% for terms up to 3 years. This applies to applications dated October 22, 2026 or later; Ohio 3-4 unit rules stay the same.

Review recommendedApplications dated on or after Oct 22, 2026Checks passed· adjusted automaticallyRead the announcement ↗ (opens in a new tab)

Loan impact

Summarized from the announcement · needs review

Applies to: Pennymac Non-QM loans (A-, A, A+, DSCR) on Ohio 1-2 unit properties and on Michigan properties, with applications dated October 22, 2026 or later.

Scope differs by change; see each change below.

Addressed to
Pennymac correspondent sellersFrom the publisher, not quoted from the text
Investor
PennymacFrom the publisher, not quoted from the text
Programs
Non-QM
Affected area
Products
Affected documents
Prepayment penalty terms in the note
Exceptions
Ohio properties with 3 or 4 units keep their current prepayment penalty rules
Effective
Applications dated on or after Oct 22, 2026
Applicability confidence
Needs review: some rows could not be matched to a quote from the source

Summary by AWACS. Pennymac Correspondent's guide is proprietary, so AWACS does not reproduce its text. Read the official announcement ↗ (opens in a new tab)

What changed

Summarized from the announcement
RequirementPreviouslyNow
Ohio Non-QM prepayment penalties on 1-2 unit loansRelaxedNot statedAllowed, capped at 1% of unpaid balance with a term no longer than 5 years
Applies when: State is OH · Units of at most 2
Michigan Non-QM prepayment penaltiesRelaxedNot statedAllowed, capped at 1% of unpaid balance with a term no longer than 3 years
Applies when: State is MI

What to do

AWACS interpretation · not source language

What to review: None of these changes is mandatory: for applications dated October 22, 2026 or later, lenders may now add prepayment penalties to Pennymac Non-QM loans (A-, A, A+, DSCR) on Ohio 1-2 unit properties, capped at 1% of the unpaid balance for up to 5 years, and on Michigan properties, capped at 1% for up to 3 years, while Ohio 3-4 unit loans keep their current rules.

QC implications

  • For Pennymac Non-QM loans with applications dated October 22, 2026 or later that carry a prepayment penalty on an Ohio 1-2 unit property, check that the penalty is no more than 1% of the unpaid principal balance and the term is no longer than 5 years.
  • For Pennymac Non-QM loans with applications dated October 22, 2026 or later that carry a prepayment penalty on a Michigan property, check that the penalty is no more than 1% of the unpaid principal balance and the term is no longer than 3 years.
  • Check that Ohio 3-4 unit loans still follow the existing prepayment penalty rules and do not use the new Ohio allowance.
  • Check that the prepayment penalty terms in the note match the cap for the property's state.

Source and record

Version 1 · archived

Checks

  • Source verified: Passed

    The document ID, link and publication date match the official source.

  • Quotes match the source: Passed

    Every quoted passage appears word for word in the official document.

  • Requirements backed by the source: Passed, adjusted automatically

    Anything marked required is backed by the requirement language and dates in the source.

    • An independent check could not confirm a detail; it was downgraded, never upgraded

  • In scope: Passed

    The document is about residential mortgage lending.

  • Format and labels: Passed

    The record follows the AWACS format and uses its standard labels.