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 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.
Remember:
If a deal to buy, repair or
refinance a house sounds too
good to be true, it usually
is!
Housing counselors
can help you be a smart
consumer.
Source:
http://www.hud.gov/offices/hsg/sfh/buying/loanfraud.cfm
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