A New York high-cost home loan in 2026 offers an optional payment that grows the balance. Does offering that payment option comply with the negative-amortization restriction?
Correct Answer
C) Unlawful: the option alone makes it a negative amortization schedule
A loan is considered to have a negative amortization schedule if the borrower is given the option to make regular periodic payments that cause the principal balance to increase, even if the borrower is also given the option to make payments that do not. Other choices: offering the alternative does not save it; an acknowledgment does not either; and use of the option is not required. Source: N.Y. Banking Law § 6-l(2)(c)
Why This Is the Correct Answer
A loan is considered to have a negative amortization schedule if the borrower is given the option to make regular periodic payments that cause the principal balance to increase, even if the borrower is also given the option to make payments that do not. Other choices: offering the alternative does not save it; an acknowledgment does not either; and use of the option is not required. Source: N.Y. Banking Law § 6-l(2)(c)
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