“Predatory Lending” into the “Refi” Era: A Primer

“Predatory Lending” into the “Refi” Era: A Primer

The most continuously newsworthy topic regarding personal finance has surprisingly not been taxes, but rather mortgage rates or more specifically, refinancing for the past five years. Now we are nearing the end of the Real Estate Bubble, creditors are being scrutinized for their lending tactics under the misnomer “Predatory Lending” that it appears.

Top signs and symptoms of the “predatory” loan are:

  • Exorbitant charges: Totaling significantly more than 5% associated with loan amount;
  • Resource Based Lending: Basing the mortgage quantity on the debtor’s assets, maybe maybe maybe not earnings (power to repay);
  • Flipping: Refinancing the home owner again and again without cognizable advantage, therefore stripping the borrower of personal equity while charging you fees that are unnecessary
  • Abusive Pre-Payment Penalties: Effective to get more then three (3) years and costing more the six (6) months’ interest;
  • Steering: putting borrowers into sub-prime mortgages with a high charges and interest if the debtor would otherwise be eligible for a a loan that is conventional
  • Targeting: Marketing sub-prime loans to minorities no matter financial realities;
  • False Appraisals: Increasing the level of that loan centered on a deliberately high assessment associated with the home;
  • Cash Out Refinances: Pressuring vulnerable borrowers to improve the quantity of their loan by borrowing more money to satisfy a misperceived need;
  • Falsifying application for the loan: persuading borrowers to misstate their earnings; and
  • Dragging the human body: agents actually using home owners to a loan provider who provides TILA disclosures on some type of computer, that the home owner is anticipated to instantly read, realize after which to acquiesce.Read More