Recognizing Predatory Lenders
Want to stop predatory lending? Arm yourself with the knowledge you need to spot mortgage scams and steer clear of the sharks that cruise the home lending waters. Here’s a short guide to help you identify mortgage fraud.
Fast Talking Loan Rep? Beware of Predatory Lending Fraud!
Resist sales reps that use fast talk and a smooth approach. Put the brakes on their run-away monologue by interrupting with questions while they are talking. Insist on taking notes by hand and that they hold their tongue while you make notes!
High Rates and Fees? Warning: Mortgage Fraud Ahead
One way you can spot a mortgage scam is to look for high rates and unusual fees. Some common fees associated with predatory mortgage lending are:
- Early repayment penalties
- Repayment insurance packaged with the loan
- Fees that total five percent or more of the cost of the loan
Sign NOW…Regret Later
It’s the oldest sales scam in the book: once the buyer is good and worried about the money they could lose by waiting for even a single day, set the hook, and get a signature.
Also, beware of sales reps that try to pressure you into taking a loan that sounds risky or that you do not want. Once you are lured in to a bad lending contract getting out can be very difficult. Never let a sales rep pressure you into signing now because you may regret that decision for a very long time.
Bad Credit OK? Watch Out for High Rates
Your bad credit won’t be a problem to a predatory mortgage lender because bad credit is a convenient excuse to offer you outrageous interest rates, impossible payment schedules, and high fees. Remember: the goal of predatory mortgage lending is not to make a killing off the interest payments; (that’s just a bonus). Instead, the bad lender wants you to default so they can take your money and your house.
Lying on the Application? Don’t
Do not lie about your income (or other details) on the loan application. A predatory mortgage lender may tell you this practice is okay, or that everybody does it. If you fall for this, you are now liable for fraud. Congratulations.
Also, do not sign a blank loan document. Would you sign a blank check and give it to a stranger? Of course, not.
A Predatory Lender Cares About You
You are about to make him or her a lot of money. When in doubt, listen to your gut. If you get a feeling that a loan sales rep is full of it, walk away without signing anything.
Loans Solve Everything
Another lie told by predatory mortgage lenders. A mortgage loan is a responsibility, and the penalty for messing up this responsibility is losing your home.
The Closing Surprise
At the closing, you are presented with a set of fees and charges that are very different from earlier agreed amounts. Insist on the original amounts or do not sign. Do not allow the lender to bargain.