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What is Predatory Lending?

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Predatory lending is deception or fraud, manipulating the borrower or taking unfair advantage of a borrower. Some low and moderate-income families have seen the dream of homeownership become a nightmare because of predatory and abusive lending practices.

Horror stories about victims of predatory lending are everywhere in the media these days:

  • The 79 year-old man with dementia who signed away her house for a loan with an interest rate impossible to repay.
  • The family that lost their house because a high-fee, high-interest loan came due in a balloon payment beyond their means to pay or to refinance.

It's a sad fact: Prime targets for predatory lenders are the elderly and people in lower-income groups who are feeling financial pressure. Predatory lenders usually push their services on those who need money for medical bills, property taxes or high-priced home repairs by painting their loans as the answer to financial woes. But instead of providing access to money with reasonable rates and terms, predatory lenders push loans with high interest rates and through-the-roof fees, and follow-up collection strategies that are nothing less than harassment.

What predatory lending practices do I need to understand?


Predatory lending may include:
  • Charging excessive interest rates that are not justified by the level of risk involved.
  • Charging and/or financing excessive points and fees.
  • Loaning money based on the amount of equity of a home when it is evident the homeowner will not be able to repay the loan.
  • Requiring borrowers to purchase unnecessary credit insurance.
  • Charging extended prepayment penalties that trap borrowers into high-interest loans.
  • Conspiring with home improvement contractors to solicit loans with adverse terms.
  • Inflating the appraisal value of a house.
  • Using "mandatory arbitration" clauses that deny borrowers their rights in court.

Protect Yourself from Lending Abuse

Abusive or "predatory" lenders target people who are strapped for cash. But the loans they push usually have sky-high interest rates and fees. They're often illegal, too. You need to know how to tell a "good" loan from a bad one. Otherwise, you could end up paying too much, hurting your credit rating—and even losing your home.


Do you think you have a Predatory Loan?

Let Fidelity First Home Mortgage evaluate your current mortgage to see if you have been a victim of Predatory Lending.

 

Click here to have a specialist contact you.

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