Finance
In Missouri, 'negative amortization' on an adjustable-rate mortgage occurs when:
AThe loan balance decreases each month
BThe monthly payment is less than the interest owed, causing the unpaid interest to be added to the loan balance✓ Correct
CThe interest rate decreases each year
DThe borrower pays extra principal each month
Explanation
Negative amortization occurs when the required monthly payment doesn't cover all accrued interest. The unpaid interest is added to the principal balance, causing the loan to grow rather than shrink.
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