Document Updates: Various Balloon Payment Disclosures

Some states require a specific disclosure to be given when a loan has a balloon payment. We provide the following documents for these requirements:

• CA Balloon Disclosure (Cx2800), pursuant to Cal. Bus. & Prof. Code § 10241(h);
• CA Balloon Disclosure Regarding Extension of Credit (Cx2786), pursuant to Cal. Bus. & Prof. Code § 10241.4;
• CO Balloon Note Disclosure (Cx2793), pursuant to Colo. Rev. Stat. Ann. § 5-3-208;
• MD DLLR Disclosure (Cx13900), pursuant to Md. Code Regs. 09.03.10.03; and
• NY Balloon Payment Disclosure (Cx4168), pursuant to N.Y. Comp. Codes R. & Regs. tit. 3, § 80.4(a) & (b).

Currently, these documents are configured to print for traditional balloon payment loans when field “Balloon Indicator” (FI 27621) equals “Yes”. However, there are other loans where a balloon payment technically exists (and is disclosed on the LE/CD), even though they are not traditional balloon payment loans, such as:

• Loans with deferred payments for the life of loan;
• Interest-only payments for the life of loan; and
• Interest-only, construction-only loans.

Based on our research of the above referenced laws, we have ascertained that the required balloon disclosures should also be provided for these types of non-traditional balloon loans. This is primarily based on a conservative interpretation of the definitions and descriptions in these laws, holding that they apply to any loan with a balloon payment feature and not just to traditional balloon payment loans. For example, Md. Code Regs. 09.03.10.03 requires a disclosure to be provided in connection with a residential mortgage loan transaction which has a balloon payment. The definition of “balloon payment” under Ibid. 09.03.10.01(B)(1)(a) is “any scheduled payment on a mortgage loan that is more than two times the average of all other payments scheduled to repay the mortgage loan.” A lump sum is due at the maturity of the previously mentioned nontraditional balloon loans which is more than twice as large as the regularly scheduled periodic payments. It is debatable whether such a lump sum can be considered a periodic payment or not under Maryland law, but we are applying a conservative standard that it is so considered, to ensure that there is no violation of Supra (and there is no harm in providing the disclosure, even if it may not be required). The other disclosures listed above for other states have similar conditions and definitions.

New Field

Because FI 27621 is meant for traditional balloon payment loans, we have created new field “Print Balloon Payment Disclosure” (FI 143027) to be used to trigger our balloon disclosures to print for other types of loans which have a balloon payment feature. We have globally mapped this field to “Yes” when:

• “Balloon Indicator” (FI 27621) = “Yes”;

OR

• “Loan Purpose (MISMO)” (FI 1063) = “ConstructionOnly”;

OR

• When:
  • “Interest Only Months” (FI 1017) > 0
    AND
  • “First Principal And Interest Payment Date” (FI 22826) is equal to “Maturity Date” (FI 15368);

OR

• When:
  • “Deferral Period Months” (FI 42416) > 0
    AND
  • “First Principal and Interest Payment Date After Deferral” is equal to “Maturity Date”
    AND
  • Either:
    • “Forgivable Loan Indicator” (FI 131865) does not equal “Yes”
      OR
    • “Disclose Forgivable Loan Balloon Payment” (FI 131868) does not equal “No”.
      [This ensures forgivable loans that are set to not disclose a balloon payment on the Loan Estimate and Closing Disclosure will also not trigger the balloon payment disclosures to print.]

Print Configuration Changes

We have added the following new print conditions to the following documents, to enable these balloon disclosures to print for 1) traditional balloon loans (under the current print conditions, which will not be modified), and 2) for other types of loans that are not traditionally balloon loans, but that have a balloon payment feature:

1. Cx2800 CA Balloon Disclosure:

New print condition 2:
State Code (2279) = California
Document Package Type (18215) = Initial Disclosure
Print Balloon Payment Disclosure (143027) = Yes
Print REL Supplemental Disclosure (101158) = No

2. Cx2786 (upon request) CA Balloon Disclosure Regarding Extension of Credit

New print condition 2:
State Code (2279) = California
Document Package Type (18215) = Initial Disclosure
Print Balloon Payment Disclosure (143027) = Yes
California License Type (Lender) (51790) = CA Real Estate Law, Not Selected

3. Cx2793 CO Balloon Note Disclosure

New print condition 2:
Amortization Type (2275) = Adjustable Rate Negative Amortization, AdjustableRate, Fixed, OtherAmortizationType
State Code (2279) = Colorado
Document Package Type (18215) = Closing
Print Balloon Payment Disclosure (143027) = Yes
Heloc (28859) = No

4. Cx13900 MD DLLR Disclosure

New print condition 2:
State Code (2279) = Maryland
Document Package Type (18215) = Initial Disclosure, Pre-Closing, Redisclosure, TILA Redisclosure
Print Balloon Payment Disclosure (143027) = Yes

5. Cx4168 NY Balloon Payment Disclosure

New print condition 4:
Lien Position (1041) = SecondLien
State Code (2279) = New York
Document Package Type (18215) = Initial Disclosure
Print Balloon Payment Disclosure (143027) = Yes
Loan Amount Greater Than 250k (74204) = Yes

New print condition 5:
Lien Position (1041) = FirstLien
Amortization Type (2275) = AdjustableRate
State Code (2279) = New York
Document Package Type (18215) = Initial Disclosure
Print Balloon Payment Disclosure (143027) = Yes
Loan Amount Greater Than 250k (74204) = No

New print condition 6:
Amortization Type (2275) = Fixed
State Code (2279) = New York
Document Package Type (18215) = Initial Disclosure
Print Balloon Payment Disclosure (143027) = Yes
Stepped Rate Option (38528) = Stepped Rate – Five Tiers, Stepped Rate – Four Tiers, Stepped Rate – One Tier, Stepped Rate – Three Tiers, Stepped Rate – Two Tiers
Loan Amount Greater Than 250k (74204) = No

Effective Date

These changes will be in effect on September 8, 2021 and are available for testing on Stage servers. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.

DR 341558