Could You Be a Victim of Predatory Lending?

Friday, October 12, 2012

For most people, buying a home is one of the most important financial decisions they will ever make. Many homeowners unfortunately fall victim to lending abuses, and their long-awaited dream of homeownership often ends in a financial nightmare.

The Center for Responsible Lending reports that since 2007 more than 7.5 million homes have entered into the foreclosure process.

Amherst Securities, a leading broker/dealer specializing in the trading of residential and commercial mortgage-backed securities, estimates that more than 10 million foreclosures are still ahead, and 1 out of every 5 homeowners is at serious risk of foreclosure.

Financial experts have long held predatory lenders responsible for the foreclosure crisis and its devastating impact on our communities.

Predatory lending is unfair, unethical and illegal.

Predatory lenders often target senior citizens, minorities, people with disabilities, and low-income families with unnecessarily expensive loans, excessive fees, and high pressure tactics. Most predatory lenders often share the same ethnicity or race as their victims.

Predatory Lenders May:
• Tell you that they are your only  chance of getting a loan.
• “Pack” a loan with unnecessary products and services.
• Try to make a loan more attractive by having low monthly payments but charging a large balloon payment at the end of the loan period.
• Knowingly loan you more money than you can afford to repay.
• Convince homeowners to repeatedly refinance their loans within a short period of time, thereby stripping the home of its equity.
• Use false appraisals to increase the home’s actual value.
• Pressure you to accept a higher risk loan.
• Persuade you to lie about your income in order to qualify for a loan.
To avoid costly pitfalls later, be a smart consumer and learn about the homebuyer process first.

Smart Consumer Tips:
• Shop around. Compare loans from different lenders.
• Borrow only the amount you need and can afford.
• Ask about any additional fees and prepayment penalties, if any. Make sure that they are  reasonable.
• Avoid loans with low monthly payments and a “balloon” payment at the end of the loan payment.
• Do not sign documents containing blank spaces.
• Obtain copies of all loan documents.
• Read everything carefully. Ask questions if there are terms you don't understand.