Which of the following is NOT a limitation for high-cost mortgages?

The key aspect of high-cost mortgages is the regulations designed to protect borrowers from predatory lending practices. It is essential to understand that certain features that impose additional risk or cost on borrowers are typically restricted.

In this context, negative amortization refers to a situation where the mortgage payments do not cover the interest cost, leading the loan balance to increase over time rather than decrease. For high-cost mortgages, negative amortization is generally prohibited because it can place borrowers in a precarious financial situation, increasing the risk of default and leading to greater overall debt. This regulation aims to protect consumers from loans that can become unmanageable.

On the other hand, features like balloon payments (which require a large payment at the end of the loan term), the imposition of a default interest rate (which often increases the cost burden on borrowers in the event of a missed payment), and restrictions on advance payments (which help borrowers avoid penalties for early payoff) are regulated or limited in high-cost mortgages. This is done to ensure that borrowers have manageable repayment options and are not subjected to sudden financial burdens.

Therefore, the allowance of negative amortization would not align with the protective measures intended for high-cost mortgages. Understanding these distinctions is crucial for navigating mortgage lending practices and ensuring a fair