It starts with the Republican and Democratic leaders on the House Financial Services Committee. They are planning to make predatory lending legislation a major priority next year, regardless of the outcome of the November elections.
Now, with this in mind, whose better interest do they truly have in mind; the borrower or the lenders out there. I know there have been several blogs and comments made on behalf of this topic. The most recent of which was from Roberta Murphy, Predatory Lending and Decadent Spending , which gives us a great example of what can take place after the fact.
Predatory loans are concentrated in the subprime market. Subprime loans are supposed to cost a little more to compensate for borrowers' poor credit. However, in a recent study according to Freddie Mac and Fannie Mae, 35 to 50 percent of subprime loans are made to borrowers who could have qualified for prime loans. And many subprime loans of which aren't just reasonably more expensive; they’re outrageously predatory. And this is my arguement to other lenders that I compete against. I tell them that if they don't have FHA, that they have to resort to the subprime world. Several have offered that they can do these loans conventionally. Yes and no. It's called a convetional loan, but the client ends up getting a loan program that results in a certain Level, may it be a level 1 , 2, or 3. Hey, great, but the rate is still higher and the mortgage insurance is higher. Get to know your programs and what can be the best for your client.
This goes hand in hand with the cartoon. Basically predatory lending is an upside-down world of lenders who fight for the creation of laws that would require them to take into consideration the borrowers ability to repay a loan. But this is up to our government and we the people are part of that government. We blame it on the politicians, but it comes down to us, standing up for the rights of the general public. That means voting and paying attention to the ballets and what is listed on them.
And remember that this isn't just in the mortgage and banking industry. This is wide spread which covers other businesses such as rent to own centers and check cashing stores. This is to name a few of what is out there.
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