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#1830705 - 07/05/13 11:18 PM Balloon Loans and Monthly Payments
Bville Offline
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Bville
Joined: May 2001
Posts: 1,282
Out West
We will be making balloon loans that are not QM loans. We are not a small creditor.

If we make a higher-priced covered transaction we will need to include the balloon in the monthly payment to calculate ATR.

Assume we make a 7 year balloon amortized over 20 years. To calculate the monthly payment for ATR do we just figure what the monthly payment would be if there was no balloon and the entire loan amount was amortized over 7 years?

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Ability to Repay/Qualified Mortgage Rule
#1830816 - 07/08/13 03:40 PM Re: Balloon Loans and Monthly Payments Bville
dblack Offline
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Joined: Feb 2008
Posts: 263
AL
From page 21 of the CFPB small entity guide.

"For higher-priced balloon loans: Use the maximum payment in the payment
schedule, including any balloon payment"
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#1830834 - 07/08/13 04:22 PM Re: Balloon Loans and Monthly Payments Bville
zitch70 Offline
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Joined: Apr 2001
Posts: 331
Edinburg, Texas
I do not think you can have a balloon on an HPML either QM or non QM. The only way you can do balloons (excluding small creditor) is make it an non Qualified Mortgage loan. YOu will need to keep the APR below 1.5% above the APOR.

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#1830959 - 07/08/13 06:41 PM Re: Balloon Loans and Monthly Payments dblack
Bville Offline
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Bville
Joined: May 2001
Posts: 1,282
Out West
Thanks, John. I get so tied up in looking at the reg I forget to go back and read the plain language in the guide.

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#1830966 - 07/08/13 06:46 PM Re: Balloon Loans and Monthly Payments zitch70
Bville Offline
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Bville
Joined: May 2001
Posts: 1,282
Out West
Zitch70, this is one of the subtle confusing points I've been trying to sort out. There is a difference between a Higher-Priced Covered Transaction 1026.43(b)(4)and a Higher-priced mortgage loan (HPML) and the High-cost (HOEPA)loan. I think the balloon is only forbidden on the HOEPA loan.

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#1831029 - 07/08/13 08:01 PM Re: Balloon Loans and Monthly Payments Bville
ahkcompliance Offline
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Joined: Sep 2008
Posts: 2,474
Midwest
We do fall under the Balloon Payment QM exemption. Do I understand it correct that as long as the loan is not HPML, we do not need to use the balloon payment in our repayment ability as long as the maturity is 61 months or greater?

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#1831052 - 07/08/13 09:01 PM Re: Balloon Loans and Monthly Payments Bville
dblack Offline
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Joined: Feb 2008
Posts: 263
AL
Yes.
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