Is there any regulations other than HOEPA/HCM rules that prevent a 5 year balloon loan?
We will be eligible to make Temp. Balloon Payment QMs until the sunset date but currently we only offer 7 year balloons. Senior Mgt. is considering offering a 5 year balloon (except for HOEPAs) until the temp rules expire. Also, the balloon payment has to hit at 61 months or the balloon has to be considered in ability-to-repay?
Offering a five-year balloon under the temporary balloon QM rules is a great option for all consumer credit transactions secured by a dwelling after the January effective date. The HOEPA balloon restrictions (seven years) expire at that time.
The loan must have a term of 61 months or longer under Section 1026.43(c)(2) (the general ability to repay rules. Under section 1026.43(e)(6) (the temporary balloon payment QM) the term must be five years (60 months) or longer.