What practices are prohibited?
The following features are banned from high-rate, high-fee loans: All balloon payments – where the regular payments do not fully pay off the principal balance and a lump sum payment of more than twice the amount of the regular payments is required – for loans with less than five-year terms. There is an exception for bridge loans of less than one year used by consumers to buy or build a home: In that situation, balloon payments are not prohibited. Negative amortization, which involves smaller monthly payments that do not fully pay off the loan and that cause an increase in your total principal debt. Default interest rates higher than pre-default rates. Rebates of interest upon default calculated by any method less favorable than the actuarial method. A repayment schedule that consolidates more than two periodic payments that are to be paid in advance from the proceeds of the loan. Most prepayment penalties, including refunds of unearned interest calculated by any method less favorable t
