CFPB TRID Sec. 14.13 - How does the creditor disclose a balloon payment in the Loan Terms table and Projected Payments table?

Compliance > Regulation Z - TILA / TRID Specific > General Info
Q:  How does the creditor disclose a balloon payment in the Loan Terms table and Projected Payments table?
 
A:  When a creditor discloses the construction phase of a construction-permanent transaction separately from the permanent phase, the balloon payment due at the end of the construction phase must be disclosed in the Loan Terms table pursuant to § 1026.37(b)(7)(ii). In addition, a creditor would disclose the balloon payment in its own column as a separate periodic payment or range of payments in the Projected Payments table. (§ 1026.37(c)(1)(ii)(A))
 
For example, assuming the construction phase requires interest-only payments:
  • In a one-year, construction loan with a fixed interest rate, if the final balance of the construction phase corresponds to the twelfth or final monthly payment, the balloon payment will include the interest that has accumulated since the eleventh payment was made.
  • When disclosing the balloon payment in the Loan Terms table of the Loan Estimate, the creditor discloses the balloon payment as the loan amount plus the final amount of interest that accrued between the eleventh payment and the final balance of the construction phase.
  • In the Projected Payments table, the balloon payment disclosed is the same amount as disclosed in the Loan Terms table. (Comment app. D-7.i; § 1026.37(b)(7)(ii) and § 1026.37(c)(1)(ii)(A))
  • In a one-year construction loan with an adjustable interest rate, if the final balance of the construction phase corresponds to the twelfth or final monthly payment, the balloon payment will include the interest that has accumulated since the eleventh payment was made.
  • When disclosing the balloon payment in the Loan Terms table of the Loan Estimate, the amount disclosed is the “maximum amount” and is based upon the loan amount plus the maximum payment of interest in the range of payments that would be disclosed in the Projected Payments table.
  • In the Projected Payments table, the balloon payment range disclosed is the loan amount plus the minimum amount of the interest payment on the low end of the range and the loan amount plus the maximum amount of the interest payment on the high end of the range disclosed in the first column of the Projected Payments table. (Comment app. D-7.i; § 1026.37(b)(7)(ii) and § 1026.37(c)(1)(ii)(A))
 
This information can be found in the CFPB's TILA-RESPA Integrated Disclosure rule compliance guide - http://www.consumerfinance.gov/regulatory-implementation/tila-respa/
 

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