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Our bank is not in a rural area or underscored area and is considered in an urban area census tract. We do make some non-qualified balloon payment mortgages. Is the ATR requirement the only issue we need to consider on these loans? As long as our policy allows this, are there any other regulatory requirements we need to be aware of?
For non-qm balloon loans you would need to consider the 8 ATR factors, which includes special payment calculation instructions for balloon loans. You can find those in 1026.43(c)(5). The commentary lays out the requirements. Here’s a link to the reg and commentary: https://www.bankersonline.com/regulations/12-1026-043#c.
“For higher-priced covered transactions with a balloon payment, the creditor must consider the consumer’s ability to repay the loan based on the payment schedule under the terms of the legal obligation, including any required balloon payment. For loans with a balloon payment that are not higher-priced covered transactions, the creditor should use the maximum payment scheduled during the first five years of the loan following the date on which the first regular periodic payment will be due. ”
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