Which of the following loan terms is prohibited on a high-cost mortgage under HOEPA?
Correct Answer
C) A payment schedule that results in an increase in principal balance
HOEPA prohibits negative amortization on high-cost mortgages, which occurs when the payment schedule results in an increase in the principal balance. Interest-only periods, payment increases, and fixed rates are not specifically prohibited by HOEPA.
Why This Is the Correct Answer
HOEPA prohibits negative amortization on high-cost mortgages, which occurs when the payment schedule results in an increase in the principal balance. Interest-only periods, payment increases, and fixed rates are not specifically prohibited by HOEPA.
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