Q: Risk-Weight for Balloon Payments. If a financial institution adds the option of including a deferred payment as a balloon payment at maturity, does that jeopardize it receiving a 50 percent risk weight?
A: The option to include the deferred payment as a balloon payment will not jeopardize the 50 percent risk weight if it is prior to the 30-year maturity (so that the loan would otherwise amortize to $0 by the end of 30 years.)
This Q&A was contained in the Frequently Asked Questions for Financial Institutions Affected by the Coronavirus Disease 2019 (Referred to as COVID-19) – As of March 3, 2021 (which may be updated from time to time). This may be found on the FDIC’s website here: https://www.fdic.gov/Coronavirus/faq-fi.pdf.