Finance
Negative amortization in a Pennsylvania mortgage occurs when:
AThe borrower makes extra principal payments
BMonthly payments are insufficient to cover the interest, causing the loan balance to grow✓ Correct
CThe property value falls below the loan balance
DThe lender applies payments to fees before principal and interest
Explanation
Negative amortization occurs when monthly loan payments are less than the interest accruing, causing unpaid interest to be added to the principal balance. This means the loan grows over time rather than decreasing. Pennsylvania's anti-predatory lending laws limit this practice.
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