How to Avoid
Predatory Lending

Most mortgage lenders and brokers have your best interests in mind. However, there are the bad guys,  "predatory lenders" - lenders that act unscrupulously and may try to take advantage of you.

Although predatory lending is not defined by federal law and states define it differently, this type of lending usually involves loans with terms you can't meet - no matter how good the deal sounds - and practices that strip away the equity in your home.

Who do predatory lenders target?

Predatory lenders target people who may have fewer credit choices or are perceived as higher credit risks. Predatory lenders usually reach out to elderly and low-income homebuyers, minorities and women, people with less than perfect credit, and people who know very little about home loans and mortgages.  These lenders usually tell you that you can get loans with very low monthly payments, refinance your existing mortgage, or take out a loan or second mortgage to help pay for expenses like medical costs and home-improvement work.

How can you spot a predatory lender?

Predatory lenders usually offer loans with high interest rates; broker fees; unnecessary costs like pre-paid life insurance; and unaffordable repayment terms.   Be suspicious of anyone who offers you "bargain loans," whether they mail or E-mail you an offer, call you on the phone, or come to your door. Avoid promises of "No Credit?  Bad Credit?  No Problem!",  and beware of offers that are only "good for a very short time."   Remember this; If it is too good to be true,  it is!

Avoid lenders who encourage you to borrow more than you need or more than the value of the home. Beware of terms that change at the last minute or offer next-day approval based on prepayments or up-front fees.  Remember that when you sign the GFE (Good Faith Estimate) at the time you sign your application, (1003 application form),   the figures at closing might be a little different because we are required to estimate what the costs will be.  And normally there are some differences in fees maybe $50-100.00 or so. 

What to do?

But if you see several or many hundreds of dollars difference than what you originally signed for, you are probably dealing with a "predatory lender."  The differences will be so widely different at closing that it should alarm you.  Then do not sign any further, and do not be intimidated by anyone at the closing.  Just calmly say that you want to compare the GFE with the one you signed in the beginning.  If the differences are so wide like several hundred dollars into the thousands,  let the escrow officer know you need to go make a telephone call.  

Have with you for your protection the telephone numbers of:

  Local Police Department

1. Office of The  District Attorney
2. The state Department of Real Estate
3. An office of a Real Estate Attorney, for your benefit.
4. Make the calls!  You'll be glad you did!

Who is in charge?    It is your money?

When you are in a transaction regarding your home, it is a huge undertaking.  Most of us including myself get a little nervous about all we have saved, invested, or moving up into a new home.  And sometimes we let our emotions carry us through by advice of the intended "Bad Guy."   And that is where we can get in trouble.

If during a real estate transaction, you start to not to trust the situation,  your initial guts could be correct.  Remember you are not finally obligated until you have signed ALL of the documents no matter what anyone tells you.  Remember this, it is your money and you are actually in charge,  not all the people helping you close the transaction.

If you have any questions or I may be of service to you, feel free to call my office anytime: 1-800-720-5596.

Steve Snyder

C M G Mortgage Services, Inc.