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In communities across America, people are losing their homes and their investments as a result of predatory lending and unscrupulous appraisers, mortgage brokers and home improvement contractors. While these individuals often break the law, it it not always the case. See Mortgages and Your Rights to Fair Lending and Mortgage Borrowers' Rights for related information.
Common Predatory Lender Actions:
- Sell properties for much more than they are worth using false appraisals.
- Encourage borrowers to lie about their income, expenses, or cash available for down-payments in order to get a loan.
- Knowingly lend more money than a borrower can afford to repay.
- Charge high interest rates to borrowers based on their race or national origin and not on their credit history.
- Charge fees for unnecessary or nonexistent products and services.
- Pressure borrowers to accept higher-risk loans such as balloon loans, interest only payments, and steep pre-payment penalties.
- Target vulnerable borrowers to cash-out refinances offers when they know borrowers are in need of cash due to medical, unemployment or debt problems.
- "Strip" homeowners' equity from their homes by convincing them to refinance again and again when there is no benefit to the borrower.
- Use high pressure sales tactics to sell home improvements and then finance them at high interest rates.
Predatory Lending Tactics
- A lender or investor tells you that they are your only chance of getting a loan or owning a home. You should be able to take your time to shop around and compare prices and houses.
- The house you are buying costs a lot more than other homes in the neighborhood, but isn't any bigger or better.
- You are asked to sign a sales contract or loan documents that are blank or that contain information which is not true.
- You are told that the Federal Housing Administration insurance protects you against property defects or loan fraud - it does not.
- The cost or loan terms at closing are not what you agreed to.
- You are told that refinancing can solve your credit or money problems.
- You are told that you can only get a good deal on a home improvement if you finance it with a particular lender.
Unfortunately, predatory lending exists everywhere consumers do and can turn the American dream of home ownership into a nightmare. Make sure you do your homework and protect your interests before signing on the dotted line.