A lender wants to charge a prepayment penalty on a 7-year balloon HPML. The penalty would apply only in years 1-2 and equals 2% of the outstanding balance. Is this permissible?
Correct Answer
C) No, because HPMLs cannot have prepayment penalties regardless of loan type
Under TILA Section 1026.35(b)(2), HPMLs are prohibited from having prepayment penalties. This prohibition applies to all HPML types, including balloon loans, regardless of the penalty amount or duration.
Why This Is the Correct Answer
Under TILA Section 1026.35(b)(2), HPMLs are prohibited from having prepayment penalties. This prohibition applies to all HPML types, including balloon loans, regardless of the penalty amount or duration.
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A borrower who uses a wheelchair asks about accessible properties during the loan process. The MLO responds that 'there aren't many suitable properties in the better neighborhoods' and suggests looking in a specific area known for having more disabled residents. This response:
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