Under HOEPA, a high-cost loan may have a balloon payment under which circumstance?

Under the Home Ownership and Equity Protection Act (HOEPA), a high-cost loan can indeed have a balloon payment if it is classified as a short-term bridge loan that is necessary for the construction of a primary dwelling. This situation is typically illustrated by the example of a nine-month bridge loan. Such loans are specifically designed to provide temporary financing that allows a borrower to complete building their primary home before securing a more permanent financing arrangement.

In this context, the nature of a bridge loan is that it is intended to be short-term and specifically for construction purposes. As a result, it can legally include a balloon payment, which may otherwise be restricted under HOEPA for other loan types. This unique circumstance recognizes the financial needs of borrowers engaged in home construction, allowing them the flexibility to manage cash flow during this transitional period.

Other scenarios presented do not provide sufficient justification for allowing balloon payments under HOEPA guidelines. For instance, satisfying the requirements of a balloon payment qualified mortgage involves specific regulatory criteria that go beyond simply meeting the balloon structure. Seasonal income doesn't inherently qualify a borrower for balloon payments, as it does not address the repayment terms outlined by HOEPA. Additionally, obtaining a waiver does not exempt a high-cost loan from compliance with regulatory requirements regarding balloon payments.