My team is telling me they have always been told to issue a 5 yr balloon with 61 months payment vs 60. Can anyone tell me where in the regulation this is stated?

Review 1026.43. It has to do with the ATR.

2. First five years after the date on which the first regular periodic payment will be due. Under § 1026.43(c)(5)(ii)(A)(1), the creditor must determine a consumer's ability to repay a loan with a balloon payment that is not a higher-priced covered transaction using the maximum payment scheduled during the first five years (60 months) after the date on which the first regular periodic payment will be due. To illustrate: