In determining non-amortizing features for HMDA reporting purposes, we have reviewed 1003.4(a)(27) and comment 4(a)(27)-1 as well as 1026.43(b)(2) and are looking for additional perspective on the following. A loan has a 10 year maturity term. For the first 5 years, the interest is fixed and requires principal and interest payments based on a 10 year amortization schedule. After the first 5 year period, the rate changes and is fixed for the remaining 5 years. Simultaneously with the rate change, the principal and interest payments shall be adjusted in an amount sufficient to amortize the then outstanding principal over the remaining amortization period of the loan.
Would this loan be reported as having non-amortizing features since the first five years are based on a 10 year amortization even though the maturity term is 10 years? Or would it not have non-amortizing features since the loan is fully amortizing based on the overall 10 maturity term?
I believe it would be the later, “not have non-amorizing features since the loan is fully amortizing based on the overall 10 year maturity term.” I’ll ask Jack to chime in with his perspective as well.