Protecting Yourself From Predatory Lenders

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People are losing their homes because of mortgage broker, appraisers, predatory lenders and home improvement contractors.

Predatory lenders are defined as people who use the following methods:

1) Selling property for much more than they are worth using appraisals that are false.
2) Encouraging borrowers to lie about their expenses, income, or cash available for down payments in order to get approved for a loan.
3) Knowingly lend more money than the borrower can afford to pay back.
4) Charge the borrower a higher rate of interest that is based on their national origin or race and not on their credit rating.
5) Charge fees for nonexistent or unnecessary services and products.
6) Pressure borrowers to accept loans that are a higher risk such as interest only payments, balloon loans, and steep pre-payment penalties.
7) Target borrowers that are vulnerable to cash-out refinances offers when they know borrowers are in need of cash due to unemployment, medical, or debt problems.
8) "Strip" homeowners' equity from their homes by convincing them to refinance again and again when there is no benefit to the borrower.
9) Use high pressure sales tactics to sell home improvements and then finance them at high interest rates.


Predatory Lenders use the following tactics against consumers that are shopping for mortgage loans:

1) A investor or lender tells you that they are your only chance of owning a home or getting a loan.
2) The house you are buying costs a lot more than other homes in the neighborhood, but isn't any better or bigger, or you could not resell at about the same price in the future.
3) You are asked to sign loan documents or a sales contract that contain false information or that are blank.
4) You are told that FHA insurance protects you against loan fraud or property defects - When in fact it does not.
5) The loan terms or cost at closing are not what you agreed to.
6) You are told that refinancing can solve your money or credit problems.
7) You are told that you can only get a good deal on a home improvement if you finance it with a particular lender.

A consumer should always get information about the prices of other houses in the neighborhood, interview several real estate professionals, hire a properly licensed and qualified home inspector to carefully inspect the property before you become obligated to purchase it, determine whether the seller or you is going to be responsible for paying for the repairs, determine whether or not you can afford to make the repairs, compare costs and shop for a lender before refinancing or purchasing a home.

It is important that you don't let anyone persuade you to make a statement that is false or untrue on your loan application, such as the source of your down payment, overstating your income, failing to disclose the amount and nature of your debts, or even how long you have been at your current place of employment. When you apply for a mortgage loan, every piece of information that you submit must be complete and accurate. Lying on a mortgage application is fraud and may result in criminal penalties.

Never let anyone convince you to borrow more money than you know you can afford to repay. If you get behind on your payments, you risk losing your house and all of the money you put into your property.

A consumer should never sign a blank document or a document containing blanks. If information is inserted by someone else after you have signed, you may still be bound to the terms of the contract. Insert "N/A" (i.e., not applicable) or cross through any blanks. Read everything carefully and ask questions and don't sign anything that you don't understand.

To help prevent becoming a victim of predatory lending, it is recommended for consumers to attend a homeownership education course offered by a HUD-approved housing counseling agency.

Beware of Illegal Mortgage Referral Fees.

Although all information has been written in good faith and reviewed, please email us at help@consumerbadcreditguide.com to report any inaccuracies.