Obviously if the loan pays off before the end of the five-year period the escrow can be cancelled. I don’t believe that the CFPB envisioned a scenario similar to yours. Under existing rules for HPMLs it is impossible to have a balloon payment on an HPML that has a term of less than seven years without incurring significant liability. Under the new ability-to-repay rules a balloon loan generally will be required to have a loan term of at least five years.
