Can anyone explain how a bank could be making 3 year fixed rate balloon loans? How is this possible with ATR? Examiners just missing it?

Your guess is as good as ours.

Perhaps they are hanging their hat on this... 1) does not specify that you must consider a balloon payment.

They would not have safe harbor, however.

(A) A loan with a balloon payment, as defined in § 1026.18(s)(5)(i), using:

(1) The maximum payment scheduled during the first five years after the date on which the first regular periodic payment will be due for a loan that is not a higher-priced covered transaction; or

(2) The maximum payment in the payment schedule, including any balloon payment, for a higher-priced covered transaction;

The highest payment in the first five years would be the balloon payment.

My first thought when i saw this thread was that perhaps they were referencing business purpose loans, not subject to ATR. We still make some 3 year balloons in those scenarios. But since the post was in the ATR thread, i assumed that wasn't the case, so i didn't originally mention it.

I don't disagree with that...but I can also see it being potentially misinterpreted since #2 specifically mentions *including any balloon".

Just my theory.

Nope... not business purpose. Thanks for confirming my thinking!