HOEPA and Balloon Payment Provisions

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Question:

I am looking for verificiation regarding HOEPA and Balloon payments. At a recent training seminar, we were told that HOEPA loans must have a minimum term of 5 years. We have scoured the regs for a definitive answer and cannot find any such documentation. Is there a minimum period for balloon payments on HOEPA loans?

Answer:

It is true that Section 226.32(d)(1)(i) prohibits a HOEPA loan from having a balloon loan with a term of less than five years [one exception is for bridge loans as explained in Section 226.32(d)(1)(ii)]. But this doesn't say that a HOEPA loan cannot have a term of less than 5 years. It only says that there cannot be a balloon loan with a term of less than 5 years.

First published on BankersOnline.com 03/01/04