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Preditory Lending

Predatory lending deals with lenders who take advantage of inexperienced homeowners by using a variety of fraudulent tactics to convince the borrower to pay more for the loan than needed. 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.

Posted by Chantal McBride on 06/13/2007 06:41 PM

Comments (9)

loan, mortgage, finance, properties, borrower, money, payments, refinance, purchase, homeowner, cashout, lender

9 Comments on Preditory Lending

am still learning the business and you gave great tips on what to watch-thanks:-)

06/13/2007 06:47 PM

by Traci Fant (First Realty Company)

They are starting to really crack down on this in Colorado.

06/13/2007 06:54 PM

by Bruce Swedal = Denver Real Estate (Re/Max Professionals, Inc.)

I also they they prey on new Realtors - I've been in the business 12 years and I've seen a lot. Recently I had a new agent come to me and tell me some things the mortgage broker asked her to do. She said she didn't think it was right, but was told by the mortgage broker "not to worry, they always do it this way". I directed the agent to her Broker. In the end the Realtor did NOT do it the way the mortgage broker told her too, but had she not had someone she felt she could ask, she may have taken an experienced mortgage broker's word as good. What she was asked to do was illegal and could have cost her her license not to mention many others involved could have gotten into trouble.

Thansk for sharing - and letting me vent. :-)

06/13/2007 06:54 PM

by Michelle Spalding - Transaction Consultant (Transaction Management Consultants)

Great information. This is something we all need to be more aware of. We had an office meeting on it not too long ago.

06/13/2007 06:55 PM

by The Moore Team (Keller Williams Integrity First Realty)

Great post! The saying I like to say when it comes to things like this is "Everything comes out in the wash!" Well the Real Estate Industry moreover the Mortgage Industry is doing laundry!!! I know a couple of Hispanic Loan Officers, I am Hispanic as well, who GOUGED their Hispanic clients for years. Their own people!!! I used to call the out on it EVERY time I had an opportunity. I don't anymore because they are NOW on a watch list with some pretty reputable banks. Like I always say "Do the right thing!" Predatory lending is a very real thing!

Rey "Steak Dinner" Gallegos

06/13/2007 07:05 PM

by Rey Gallegos Home Loan Consultant Las Vegas, NV (A Mortgage Bank)

This stuff is pretty scary if you think about it. Great post.

Thanks,

Sugar Land, Tx
Where Life is Sweet

06/13/2007 07:26 PM

by Christopher and Bernadette Hurley (Go Hurley Group)

Can you say......ameri quest??

06/13/2007 08:05 PM

by My Favorite Mortgage.net - Matthew J Blum

Unfortunately in every industry and profession there are bad apples.

06/13/2007 09:28 PM

by Shane Sarae, Senior Mortgage Planner (Loan Network LLC)

Thanks for the informative post...

06/13/2007 09:46 PM

by Wayne and Lynda Gomillion (Hagan & Hagan GMAC Real Estate)

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