![Page 1: Real Estate Law Center: What is Predatory Lending?](https://reader033.vdocuments.us/reader033/viewer/2022061103/53faf4898d7f729c2e8b5429/html5/thumbnails/1.jpg)
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• What is Predatory Mortgage Lending?
What is Predatory Lending?
![Page 2: Real Estate Law Center: What is Predatory Lending?](https://reader033.vdocuments.us/reader033/viewer/2022061103/53faf4898d7f729c2e8b5429/html5/thumbnails/2.jpg)
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• Real Estate Law Center Reviews some tips and solutions
What is Predatory Lending?
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• Predatory mortgage lending:– “Imposing unfair and abusive loan terms on
borrowers.“• According to the office of inspector general
of the FDIC
What is Predatory Lending?
![Page 4: Real Estate Law Center: What is Predatory Lending?](https://reader033.vdocuments.us/reader033/viewer/2022061103/53faf4898d7f729c2e8b5429/html5/thumbnails/4.jpg)
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• But what does predatory lending look like in the real world?
What is Predatory Lending?
![Page 5: Real Estate Law Center: What is Predatory Lending?](https://reader033.vdocuments.us/reader033/viewer/2022061103/53faf4898d7f729c2e8b5429/html5/thumbnails/5.jpg)
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• There are many lending practices which are abusive and have been labeled as "predatory lending."
What is Predatory Lending?
![Page 6: Real Estate Law Center: What is Predatory Lending?](https://reader033.vdocuments.us/reader033/viewer/2022061103/53faf4898d7f729c2e8b5429/html5/thumbnails/6.jpg)
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• Here are 9 signs of predatory mortgage lending practices:
What is Predatory Lending?
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• Brokers That Charge Higher Interest Rates– Charging higher interest rates can be a
predatory lending practice.
What is Predatory Lending?
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– Simply put: A broker can make more money if they increase the interest rate beyond the mortgage lender’s real interest rate charge.
– To combat this, a good question to ask a broker is will they be paid a “yield-spread premium,” or basically a financial reward lenders pay for an inflated interest rate.
What is Predatory Lending?
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• Unnecessarily Large Fees– Look out for large fees—especially when
there is no need for them.
What is Predatory Lending?
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– The lender charges “points” or a small percentage of the loan as a fee.
– Generally these range from three points or 3% of the loan amount or less, including necessities such as appraisal and title insurance.
– Be sure to get your credit score before hand and find out what other lenders charge in your area for comparisons.
What is Predatory Lending?
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• Prepayment Penalty– Requiring a fee or paying a penalty for paying
the loan off early could be a sign of predatory mortgage lending practices.
– This stipulates that the borrower agrees to pay a large fee before refinancing.
– Note that the penalty period can last several years and this can cost thousands of dollars or more.
What is Predatory Lending?
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• Ads Saying Bad Credit is Unimportant– Avoid lenders or companies who say that bad
credit unimportant in their ads. – Also be especially wary of lenders or brokers
who make contact directly, or those who try to rush a decisions or requires immediate responses.
What is Predatory Lending?
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• Targeting Minority Groups– Also unfortunately, predatory lenders
sometimes target older victims such as senior citizens or minorities in order to force unnecessarily expensive loans.
What is Predatory Lending?
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• Balloon Adjustable Interest Rates– Adjustable rate loans that can rise
significantly should be avoided. – Usually, a predatory loan balloons or adjusts
one way—higher. – Be sure to understand exactly all the options,
including what could happen in the “worst-case scenario” for any future payments.
– And don’t count on a future refinance to rescue you from an unaffordable loan.
What is Predatory Lending?
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• Resolving Problems with Future Refinancing– Beware of the promise by a lender to correct a
bad loan or deal later during a another refinancing down the road.
– If a loan is not good now, just hold off until later.
– Refinancing frequently can be a big financial drain too, and results in additional fees.
What is Predatory Lending?
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• Not Including Insurance, Taxes– Confirm that monthly mortgage payments
include additional costs, such as property taxes and insurance.
– Also be sure that the lender has created an escrow account for these costs.
– An unscrupulous lender can make mortgage payments seem artificially low by not including all extra required costs.
What is Predatory Lending?
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Real Estate Law Center 877-694-3313 www.lenderlawlitigation.com
• Real Estate Law Center
What is Predatory Lending?