Ethics · 18% of the SAFE examhard
Correct answer: Approximately $215,400; Regulation Z requires the balloon payment amount and the fact that a balloon payment is due to be disclosed clearly in the loan's Truth in Lending disclosures, including the Loan Estimate and Closing Disclosure
For a $240,000 loan at 5.5% on a 30-year amortization, the monthly payment is approximately $1,362.56. After 7 years (84 payments), the remaining balance (balloon) is approximately $215,400 (precise amortization math: each payment reduces principal slowly in the early years). Regulation Z, implementing TILA, requires lenders to clearly disclose balloon payments — including the amount and due date — on both the Loan Estimate (under 'Projected Payments') and the Closing Disclosure. These disclosures are the primary federal mechanism for preventing balloon payment traps by ensuring borrowers understand the lump-sum obligation. RESPA (A) governs settlement services, not balloon disclosures. ECOA (C) covers credit discrimination and adverse action notices, not balloon terms. Regulation B (D) is ECOA's implementing regulation and does not impose a cap on balloon payment amounts.
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