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A question we received from a member:
If we are doing a temporary 6 month loan on a customers primary residence, Are we allowed to do the loan as a single pay note with interest only paid at maturity or do we have to at least collect interest monthly?
You can do a single-pay note. One thing to keep in mind is that section 1026.45(c)(5) of Reg Z (ATR/QM rules) requires the analysis using monthly, fully amortizing payments, so in order to comply with the ability to repay requirements you’ll need to need to divide the single payment up into monthly payments for considering the monthly payment and calculating DTI. Also keep in mind the loan won’t qualify as a QM since the payments aren’t periodic and substantially equal.
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