Predatory Lending

Today, predatory/subprime lending is one of the greatest threats to families working to achieve financial security.  Predatory/Subprime lending practices disproportionately target member of underserved and low-moderate income communities.  Buying or refinancing your home may be one of the most important and complex financial decisions you'll ever make. Many lenders, appraisers, and real estate professionals stand ready to help you get a nice home and a great loan. However, you need to understand the home buying process to be a smart consumer. Every year, misinformed homebuyers, often first-time purchasers or seniors, become victims of predatory lending or loan fraud.

What is Predatory Lending?  In communities across America, people are losing their homes and their investments because of predatory lending practices, appraisers, mortgage brokers and home improvement contractors who:

  • 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.

What Tactics Do Predators Use?

  • 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.