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“Predatory Lending” into the “Refi” Era: A Primer

“Predatory Lending” into the “Refi” Era: A Primer

The most continuously newsworthy topic regarding personal finance has surprisingly not been taxes, but rather mortgage rates or more specifically, refinancing for the past five years. Now we are nearing the end of the Real Estate Bubble, creditors are being scrutinized for their lending tactics under the misnomer “Predatory Lending” that it appears.

Top ten indications of the “predatory” loan are:

  • Exorbitant Fees: Totaling significantly more than 5% for the loan amount;
  • Resource Based Lending: Basing the mortgage quantity regarding the debtor’s assets, maybe perhaps not earnings (capacity to repay);
  • Flipping: Refinancing the home owner again and again without cognizable advantage, therefore stripping the debtor of individual equity while charging you unneeded costs;
  • Abusive Pre-Payment Penalties: Effective to get more then three (3) years and costing more the six (6) months’ interest;
  • Steering: putting borrowers into sub-prime mortgages with a high charges and interest if the debtor would otherwise be eligible for a mainstream loan;
  • Targeting: Marketing sub-prime loans to minorities aside from financial realities;
  • False Appraisals: Increasing the level of that loan according to an appraisal that is intentionally high of home;
  • Cash Out Refinances: Pressuring vulnerable borrowers to boost the actual quantity of their loan by borrowing money that is additional satisfy a misperceived need;
  • Falsifying application for the loan: persuading borrowers to misstate their earnings; and
  • Dragging the human body: agents actually using property owners to a lender whom provides TILA disclosures on a pc, that the home owner is anticipated to immediately read, comprehend after which to acquiesce.

There is absolutely no reason for action for Predatory Lending.