Recognizing predatory lenders
By Bankrate.com
Don't be victimized by predatory lenders. Predatory
lending is most commonly associated with mortgages, but it also happens
with other types of loans.
What is predatory lending?
In communities across America, people are losing their homes
and their investments because of predatory lenders, 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 incomes,
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 prepayment
penalties.
- Target vulnerable borrowers to cash-out refinance
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 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 that 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.
Source: U.S. Dept. of Housing
and Urban Development
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