People are losing their homes because of predatory lenders, appraisers, mortgage brokers and home improvement contractors.
Predatory lenders are defined as people who use the following methods:
1) Sell properties for much more than they are worth using false appraisals.
2) Encourage borrowers to lie about their income, expenses, or cash available for down payments in order to get a loan.
3) Knowingly lend more money than a borrower can afford to repay.
4) Charge high interest rates to borrowers based on their race or national origin and not on their credit history.
5) Charge fees for unnecessary or nonexistent products and services.
6) Pressure borrowers to accept higher-risk loans such as balloon loans, interest only payments, and steep pre-payment penalties.
7) Target vulnerable borrowers to cash-out refinances offers when they know borrowers are in need of cash due to medical, unemployment 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 shopping for mortgage loans:
1) A lender or investor tells you that they are your only chance of getting a loan or owning a home.
2) The house you are buying costs a lot more than other homes in the neighborhood, but isn't any bigger or better, or you could not resell at about the same price in the future.
3) You are asked to sign a sales contract or loan documents that are blank or that contain false information.
4) You are told that FHA insurance protects you against property defects or loan fraud - it does not.
5) The cost or loan terms at closing are not what you agreed to.
6) You are told that refinancing can solve your credit or money 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 interview several real estate professionals, get information about the prices of other homes in the neighborhood, hire a properly qualified and licensed home inspector to
carefully inspect the property before you are obligated to buy, determine whether you or the seller is going to be responsible for paying for the repairs, determine whether or not you can afford to
make repair, shop for a lender and compare costs before refinancing or purchasing a home.
It is important that you DO NOT let anyone persuade you to make a false statement on your loan application, such as overstating your income, the source of your down payment, failing to disclose the
nature and amount of your debts, or even how long you have been employed. When you apply for a mortgage loan, every piece of information that you submit must be accurate and complete. 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.