3 Year Balloon??

Posted By: NoJustNo

3 Year Balloon?? - 11/15/19 09:38 PM

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?
Posted By: rlcarey

Re: 3 Year Balloon?? - 11/15/19 09:45 PM

Your guess is as good as ours.
Posted By: RR Joker

Re: 3 Year Balloon?? - 11/19/19 08:01 PM

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 ยง 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;
Posted By: rlcarey

Re: 3 Year Balloon?? - 11/19/19 08:05 PM

The highest payment in the first five years would be the balloon payment.
Posted By: raitchjay

Re: 3 Year Balloon?? - 11/19/19 08:07 PM

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.
Posted By: RR Joker

Re: 3 Year Balloon?? - 11/20/19 01:30 PM

Originally Posted by rlcarey
The highest payment in the first five years would be the balloon payment.


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.
Posted By: NoJustNo

Re: 3 Year Balloon?? - 01/08/20 05:37 PM

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