“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% regarding the loan quantity;
  • Resource Based Lending: Basing the mortgage quantity regarding the debtor’s assets, maybe perhaps not earnings (capacity to repay);
  • Flipping: Refinancing the home owner again and again without cognizable benefit, hence stripping the debtor of individual equity while billing unneeded costs;
  • Abusive Pre-Payment Penalties: Effective for lots 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 once the debtor would otherwise be eligible for a a main-stream loan;
  • Targeting: Marketing sub-prime loans to minorities irrespective of financial realities;
  • False Appraisals: Increasing the level of a loan according to an appraisal that is intentionally high of home;
  • Cash Out Refinances: Pressuring vulnerable borrowers to improve the actual 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: brokers homeowners that are physically taking a loan provider whom provides TILA disclosures on a pc, that the home owner is anticipated to instantly read, realize after which to acquiesce. […]