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If a loan is not considered High Priced or Section 32, then may a lender have a 5 year balloon and not disclose the highes possible rate of 7 years?
Regulation Z currently contains a requirement to verify the borrower’s ability to repay for loans subject to Section 32, Section 35 (Higher-priced mortgage loans), and credit card accounts. Under these sections a lender is not required to disclose the highest rate in effect during the first seven years, it is required to verify the borrower’s ability to repay the debt using the highest payment scheduled during the first seven years of the loan. As long as your loan does not fit one of these categories the regulation does not interfere with your ability to make a five-year balloon loan.
Please note the the Federal Reserve recently proposed to revise the repayment ability requirment and expand it to all consumer mortgage loans.
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