Under HOEPA regulations, which statement about balloon mortgages is correct?
Correct Answer
C) Balloon payments are prohibited on high-cost mortgages with terms of five years or less
Under HOEPA (12 CFR 1026.32), balloon payments are prohibited on high-cost mortgages with terms of five years or less. This restriction helps protect borrowers from the risks associated with short-term balloon loans that could lead to foreclosure.
Why This Is the Correct Answer
Under HOEPA (12 CFR 1026.32), balloon payments are prohibited on high-cost mortgages with terms of five years or less. This restriction helps protect borrowers from the risks associated with short-term balloon loans that could lead to foreclosure.
More Mortgage Knowledge Questions
A borrower is comparing two loan offers: Loan A has no points and 4.5% interest rate, Loan B has 2 points and 4.0% interest rate. The loan amount is $400,000. How much will the borrower pay upfront for the points on Loan B?
A lender charges a 1% origination fee on all loans. For a borrower obtaining a $250,000 mortgage, what is the maximum origination fee that can be charged without violating the points and fees test under the ATR/QM rule for a first-lien mortgage?
Under what circumstances can a Qualified Mortgage include a prepayment penalty?
A borrower is considering paying discount points to reduce their interest rate. Each point costs 1% of the loan amount and reduces the rate by 0.25%. On a $300,000 loan, how much would the borrower pay for 2 discount points?
A borrower asks about the difference between discount points and origination fees. What is the most accurate explanation?
People Also Study
Federal Mortgage-Related Laws
23% of exam
Mortgage Loan Origination Activities
25% of exam
Ethics, Fraud & Consumer Protection
17% of exam
Uniform State Test Content
12% of exam
Previous Question
A borrower wants to purchase a four-unit property with a conforming loan. If the baseline conforming loan limit for single-family homes is $766,550, what would be the approximate conforming loan limit for this four-unit property?
Next Question
A borrower receives their Closing Disclosure on Monday and notices the APR has increased by 0.2% from the Loan Estimate. What must happen?