In the post I was replying to, you were asking about whether there is a downside for the lender. As I mentioned, there are scenarios in which the lender does ba

In the post I was replying to, you were asking about whether there is a downside for the lender. As I mentioned, there are scenarios in which the lender does badly, but in this one, the lender gets what it wants, a stream of interest income followed by the return of principal. The borrower has, in effect, and probably inadvertently, flipped the house, but if you were doing that intentionally, you would be much better off selling the property rather than allowing it to be repossessed. Of course, someone facing a balloon payment he cannot afford is probably best advised to sell before repossession, but if that is not the situation he wanted to be in, it is likely a pyrrhic outcome at best. I suppose someone intending to flip a property might prefer a balloon mortgage if it has lower payments - financing flips is not something I know anything about - but that would seem to be a win-win situation, at least up to questions of risk. The important question with regard to so-called predatory lending is how things usually work out in practice.