Predatory Lending
Predatory mortgage lending happens when a lender deceptively originates a mortgage with unfair or abusive loan terms. Do not let this happen to you! Consider the tips in this article, so you are aware of the various signs of predatory lending. The common signs of predatory lending are unreasonably high loan fees and excessive pre-payment penalties. In the wake of the subprime mortgage debacle and the foreclosure crisis, predatory lending has become a hot topic and one that should be taken seriously so that we can prevent some of the pitfalls as we have seen in recent years.
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Excessive Lending Fees - With increased competition among traditional banks and credit unions, fees have generally been low. However, predatory lenders see fees as the best way to make quick money because these costs can be financed, and thus easy to disguise or downplay.
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We recommend that borrowers demand to receive a “good faith estimate” at the time of the loan application. As a borrower in America, you have the right to review home loan documents three days before escrow closes. This review process was created to allow borrowers a reasonable time to review loan documentation and to scrutinize lending fees.
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On competitive “A” paper loans, you can expect fees to be below 1% of the mortgage amount are standard. With bad credit mortgage and frequently with predatory home loans, fees totaling more than 3%-5% of the loan amount are common.
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Exorbitant Pre-Payment Penalties – These charges are often overlooked by borrowers, yet are included in a high percentage of subprime mortgages. FHA home loans never allow pre-payment penalties. These hidden, confusing fees trap borrowers in high rate home mortgages, which often lead to foreclosure.
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