Please forgive me if this has gone around a couple times. I have been out of the compliance world for a few years and now got back into it and my head is spinning.... In order to do balloon home loans a small creditor must meet the asset size, amount of mortgage loans your originate and must have originated at least one loan in a rural or undeserved area. Correct?

if we don't meet the "rural or underserved" can we originate balloon loans with the ATR requirements? If so you must do a balloon term of 61 months or more and you don't have to consider the balloon payment in the DTI?

thank you all so much!

That's correct. They won't be QMs, but you can do ATR-qualifying balloon loans unless your state doesn't permit them,

Can you direct me to where in the regulation it talks about the balloon term of 61 months or more? I am trying to explain this to a lender this morning who tells me they are not in violation of Reg Z. They are doing a balloon loan for 6 months to avoid the customer having to pay intangible taxes. They are supposedly planning to have this sold in 6 months. The lender wants them to pay regular payments though, not interest only. I know (I think) it is in 1026.43 but what section please???

1026.43(c)(5)

If you'll check that section out, it basically says that you have to include the largest payment in the first 5 years.