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A predatory subprime mortgage lending practice that occurs when monthly payments do not cover the interest due on the loan. The unpaid interest is then added to the mortgage balance causing the overall amount of the loan to increase.

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Negative amortization occurs when the payments made on a loan are insufficient to cover the interest due, causing the outstanding balance to increase over time. This leads to the loan amount growing rather than decreasing with each payment. It is common in certain types of adjustable-rate mortgages where the payment amount is capped, resulting in unpaid interest being added to the principal balance.

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10mo ago
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Q: What is meant by negative amortization?
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