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All About Predatory Mortgage Lending
By: Seymore Hennigan
We have all heard the stories in the press about elderly people losing their
homes due to unfair lending practices. Most reputable banks would never consider
bilking their customers out of their life savings but there are many small,
private lenders that would only be too happy at the opportunity to do it. The
act of lending money under conditions unfair to the borrower is referred to
predatory lending. Let’s examine the finer points of predatory mortgage lending.
Predatory mortgage lending has become a major policy issue for financial
institutions throughout the nation. Nearly every federal financial services
regulatory agency has denounced the practice, and has attempted to address the
problem by pressuring legislators to enact laws that protect consumers from
these fraudulent practices. Many states have enacted laws to protect their
citizens from unfair banking practices, in part due to the policy papers issued
by the major financial institutions
Predatory mortgage lending is characterized by the following: excessively high
interest rates or fees, abusive or unnecessary provisions with no benefit to the
borrower, large prepayment penalties, and underwriting that ignores the
borrower’s ability to repay the loan in question. As the details and conditions
of each financial transaction differ, high interest rates alone do not
constitute predatory lending. To qualify as predatory lending, the transaction
must contain three of the above stated conditions.
Many predatory lenders use fraudulent target marketing to identify their
potential customers. These unscrupulous financial institutions tend to
concentrate on people that are lacking a sound understanding of finance.
Predatory lenders almost exclusively look for people with limited education that
are unable to grasp the finer details of their loan conditions. They also
regularly prey on the elderly, as they have limited incomes and significant
equity in their homes.
If you or someone you know is considering borrowing for a mortgage, please take
some time to educate yourselves about the potential pitfalls. Always deal with
reputable financial institutions. If you have any concerns about the business
practices of a particular financial institution, you can always try
investigating them at the "Better Business Bureau". If you are not comfortable
doing business with them, be sure that you do not sign anything. Take some time
to speak with friends or family, and try to do business with companies that they
trust and have put their faith in. In this day and age, it pays to be an
educated consumer.
About the Author:
Seymore Hennigan has worked in finance for many years. When he is not crunching
numbers or advising his family and friends on investments, he writes freelance
articles for mortgageguide101.com – an independent mortgage guide filled with
extensive information. |
