Protect Yourself From Lending Abuse

Predatory lenders target people that are strapped for cash or who have difficulty obtaining conventional mortgage loans due to low income, self employment, sketchy employment history and/or poor credit. The loans that abusive lenders peddle have significantly higher interest rates and fees. Consumers must know how to recognize a legitimate loan from a bad one. Otherwise, they will end up paying for it later by severely damaging their credit and possibly even losing their home to foreclosure.

It’s important that borrowers are educated about abusive lending before they go to obtain a loan or get targeted by predatory marketing scams. Consumers need to know what to do and where to go if they believe they are being victimized. There are laws in place to protect consumers, giving them the legal right to report predatory lending abuse and mortgage fraud when it happens.

Personal Questionnaire

Borrowers need to take a step back and ask themselves the following questions:

1. Are you feeling pressured by time?
   Look out for phone calls or solicitations from lenders stating they can give you “next-day approval.” The same goes for lenders who offer “guaranteed” low-interest loans as long as you apply with a credit/debit card over the phone ”today.”
2. Have you done your preliminary research for the best deal?
   Research other lenders, including local banks, for their rates and total costs. You must comparison shop on the interest rates and the total costs for your loan with those of other lenders. Be on the alert for high up-front fees and percentage points. They can turn a loan with low monthly payments into one that will cost you  more in the long run.
3. Is the lender worthy of your trust?
   Make sure you get references on your lender and take the time to check them out. Never trust the lender’s word and always remain skeptical. Don’t assume that your lender is your friend. They are salespeople selling you access to money. Call your local Better Business Bureau and/or visit the BBB online so that you can find out about any complaints on every lender you are considering. 
4. Do you fully understand the terms of the loan?
   Before borrowing, you should fully understand what you’re getting and what you are paying. Don’t be shy in asking the lender to explain all fees, terms and/or conditions you don’t understand. You never should sign a blank form and must make sure that what you are signing is what you agreed to verbally. Don’t sign any contract that doesn’t match what the loan officer originally presented to you. You must also get everything the lender promises in writing - without exception.
5. Do you have all the facts and understand every part of what you’re signing?
   Get advice from people you know and trust that are not directly affiliated with your deal,  such as a banker, an accountant or a family member or friend who has the experience obtaining and paying back a mortgage loan.  Always remember, you have the legal right to change your mind for any reason, within three days of signing most loan contracts.

Predatory Lending Laws

Predatory lending laws are slowly being integrated into the legal systems of the federal government and the individual states. More than 35 states have placed a limit on the maximum prepay penalty that a homeowner should have to pay, and over 25 states have taken steps to limit abusive lending practices during the last five years.

While the definition of predatory lending varies from state to state, the awareness that consumers need to be protected by imposed predatory lending laws is increasing. Other laws in your state may be in force to protect you from abusive lending practices such as excessive high fees and high rates, given your credit profile. High fees include charges for items such as prepay penalties and credit life insurance.

RESPA and TILA

RESPA and TILA are the most important federal laws that protect your rights during the closing process:

Real Estate Settlement and Procedures Act (RESPA)
RESPA requires that consumers receive disclosures at various times in the mortgage processing transaction and forbids kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help home buyers be better informed shoppers in the process of buying a home - enforced by HUD.

Truth in Lending Act (TILA)
The Consumer Credit Protection Act of 1968 initiated Truth in Lending disclosures. For the first time creditors were required to disclose the cost of borrowing in layman’s terms so the average consumer could understand what the charges are, compare costs, and shop for the best terms and deal.

Investigation and Prosecution of Mortgage Fraud

The Federal Bureau of Investigation (FBI) and other federal law enforcement agencies take the prosecution of mortgage fraud extremely serious. Find out whether the area you live in has a federal law enforcement squad specific to mortgage fraud investigations. If there isn’t one, find out which regional federal law enforcement office covers your location. Many states and counties have criminal investigative units that specialize in mortgage fraud housed in the state’s Attorney Generals office or similar unit.

Beware of Binding Mandatory Arbitration Clause (BMA)

Many consumers just assume that they’ll be able to take their grievances to court if a lender violates the law. Unfortunately, many borrowers are denied that option through “binding mandatory arbitration” (BMA), a common clause in loan contracts. This clause actually prohibits borrowers from taking claims to court.  Victims of lending abuse often find that their loan contracts require them to go through arbitration - proceedings conducted in “secrecy” with limited evidence and documentation.

Unfortunately, with a BMA clause in a loan contract (usually not understood by the borrower at the time of signing the loan), borrowers pay excessive costs and receive unfair results. The Center For Responsible Lending has joined a coalition of leading consumer groups to educate borrowers about this severe breach of rights and formulate ways to correct the problem.

Reporting Mortgage Fraud and Abusive Lending

As more victimized homeowners and borrowers become aware of their right to report mortgage fraud and predatory lending, the elderly, minorities, those with less income and first time borrowers are less likely to become prey to abusive lending practices. Politicians and law enforcement on both the state and federal levels are becoming increasingly aware of the need for stricter predatory lending laws.

Here is a list of federal agencies and organizations where you can report formal complaints against mortgage fraud and/or abusive lending practices:

• FDIC Consumer Response Center
• Housing and Urban Development (HUD)
• U.S. Department of Justice
• Federal Bureau of Investigation (FBI)
• Federal Trade Commission (FTC)
• National Consumers League (NCL)
• National Fair Housing Alliance (NFHA)
• National Association of Attorneys General
• Center for Responsible Lending
• Association of Community Organizations for Reform Now (ACORN)
• Consumer Federation of America (CFA)

If you’ve been a victim of abusive lending practices, let your experience be known. Your complaint could save others from also becoming victims of predatory lending.

For information on mortgages, visit the ”professionals” at New Homes Lending Central.

[tag] mortgages, home loans, new home purchase, buying new home, predatory lending, predatory lenders[/tag]

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