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

“Predatory Lending” in 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 it seems we have been nearing the termination of the actual Estate Bubble, creditors are now being scrutinized with regards to their financing strategies underneath the misnomer “Predatory Lending”.

Top signs and symptoms of a “predatory” loan are:

  • Excessive costs: Totaling significantly more than 5% associated with the loan quantity;
  • Asset Based Lending: Basing the mortgage quantity regarding the borrower’s assets, perhaps perhaps maybe not earnings (capability to repay);
  • Flipping: Refinancing the home owner again and again without cognizable advantage, therefore stripping the debtor of individual equity while billing fees that are unnecessary
  • 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 as soon as the debtor would otherwise be eligible for a main-stream loan;
  • Targeting: Marketing sub-prime loans to minorities irrespective of economic realities;
  • False Appraisals: enhancing the quantity of that loan centered on an appraisal that is intentionally high of home;
  • Cash Out Refinances: Pressuring vulnerable borrowers to improve the actual quantity of their loan by borrowing more money to satisfy a misperceived need;
  • Falsifying application for the loan: persuading borrowers to misstate their earnings; and
  • Dragging the human body: brokers homeowners that are physically taking a loan provider who provides TILA disclosures on a pc, that your home owner is anticipated to instantly read, realize after which to acquiesce.