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TIL Disclosure: Required Deposit & Demand Feature

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Question: 
On a mortgage TruthInLending disclosure, there are two boxes to check that i am not sure about. One is the "REQUIRED DEPOSIT: The APR does not take into account your required deposit." The other box is "DEMAND FEATURE: This loan has a demand feature." Does the "required deposit" refer to the items deposited with the lenderthe escrow account. or does it refer to the downpayment on a purchase transaction? Does the "demand feature" refer to a balloon loan?
Answer: 

Required deposits are compensating balances that must remain on deposit for the bank's earning enjoyment. Although these are much more common in commercial lending, retail lenders impose these requirements occasionally. They are fully discussed in Section 226.18(r) of Reg. Z and the related OSC. Neither escrows nor downpayments are required deposits.

Demand features allow the lender to call the loan at any time without warning. Balloons are scheduled maturities, not demand features.

First published on BankersOnline.com 9/15/03

First published on 09/15/2003

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