Warning Signs for Recognizing Predatory Lending

Just like in any other profession not all mortgage brokers and lenders practice business fairly and ethically. Some of these mortgage brokers and lenders typically takes advantage of vulnerable groups, such as immigrants, people of color, seniors and people with disabilities who are applying to purchase homes or refinance home loans.

Consumers are protected by federal and state laws. Unfortunately, these abuses are common and are not reported. REALTORS® are working with other community groups to educate consumers on predatory lending.

These are the warning signs of predatory lending:

  • The broker or lender does not ask for any details about the client’s income or assets.
  • The broker suggests that the client use an unrelated co-signer the broker found for him or her.
  • The broker tells you to falsify information on the application for example asking you to say that your loan is for a property you are going to live in when you are not
  • The client spoke to the broker in his or her native language, but all the documents are in English.
  • The loan is interest-only or negative amortization (so the amount the client owes increases).
  • The broker promises one set of terms but at the time of signing presents the client with a different set of terms to sign, with no legitimate explanation.
  • The broker says, “I’m not charging you anything for this loan.”
  • The client is not given a chance to read his or her documents before signing because everything is rushed and tells you “It not important to read the fine print.“
  • The client is pressured into signing for a bigger loan than needed.
  • The client is pressured into accepting monthly payments you can’t make.
  • The client is told to sign over his or her deed so that someone else’s credit can be used to “refinance.”
  • Documents are back-dated or blank
  • The client is told “You cant have copies of documents that you have signed.“
  • The client is told, “Don’t worry – we can always refinance you again in 6 months/1year” or “Don’t worry – we can always refinance you again at no cost.”

Some of the information from: The Fair Housing Law Project, a program of the Law Foundation of Silicon Valley

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August 29th, 2007 · Filed Under Mortgage - Loan Information, Real Estate & Mortgage FRAUD

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3 Responses to “Warning Signs for Recognizing Predatory Lending”

  1. Hidden cost or NO closing cost refinance could be predatory lending on January 11th, 2008 2:21 AM

    [...] points but this guy was trying to get away with 3.5 points…unbelievable. Read this article about how to recognize predatory lending so you are not another [...]

  2. Whistleblower: Predatory Lending Advertisement / San Jose California on January 26th, 2008 6:46 PM

    [...] since I became involved in real estate years ago I began to realize how many unscrupulous people in the real estate and lending industry could easily misguide, victimize minorities, specially the Latino community, and average [...]

  3. Mortgage Rate Freeze Looks to Aid SOME Struggling Homeowners : San Jose-Santa Clara County Real Estate UNCENSORED on September 12th, 2008 2:47 PM

    [...] this plan could help 1.2 million homeowners but the Center for Responsible Lending, which battles predatory lending, estimates that only 145,000 would qualify for the freeze because the criteria is too [...]

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