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Including a "prepayment penalty" in a mortgage serves primarily to discourage borrowers from paying off their loans early, which ensures that lenders can maintain a stable stream of expected interest income. When a borrower pays off a mortgage ahead of schedule, the lender loses out on the future interest payments that would have otherwise been collected over the life of the loan.

The prepayment penalty acts as a financial safeguard for lenders, allowing them to recoup some of the anticipated earnings that would have been generated by the loan if it had run its full term. From the lender's perspective, this is important because they rely on the interest income to cover their costs and to generate profit.

In contrast, the other options do not align with the primary purpose of a prepayment penalty. Encouraging refinancing options does not explain a prepayment penalty, as it could dissuade borrowers from refinancing if they know a penalty exists. Promoting flexibility in loan terms is also not accurate, as prepayment penalties typically limit a borrower’s flexibility in addressing their financial obligations. Lastly, simplifying the foreclosure process is unrelated to prepayment penalties, as these penalties focus on the timing of payments rather than the process of foreclosing on a property.