Predatory Lending Practices
Predatory lending practices are the practice of unfair lending or abusive lending practices by banks, credit unions, mortgage bankers, mortgage brokers, or any residential mortgage lending institution. It is the practice of illegal charges of fees, origination fees, and/or charges in the origination of a residential mortgage loan. It is also trying to have a mortgage loan borrowers to accept a residential mortgage loan without fully disclosing the rates and terms of the loans as well as the fees and third party charges the mortgage loans borrower can incur and deceiving the residential mortgage loan borrowers to accept the terms of the loan through deceptive and exploitative methods for a residential mortgage loan that the mortgage loan borrower cannot afford or does not qualify for.
Definition Of Predatory Lending Practices
Predatory lending practices are illegal mortgage lending practices that does not benefit the mortgage loan borrower and only benefits the mortgage lender or mortgage loan originator. Mortgage lenders take advantage of the mortgage loan borrowers lack of knowledge of the rates and terms and mortgage products of the mortgage loan product that is being presented to the mortgage loan borrower.
Typical Predatory Lending Victims
Predatory mortgage lenders normally victimize the elderly, lower income mortgage loan borrowers, uneducated mortgage loan borrowers, and minorities. Predatory mortgage lenders often target mortgage loan borrowers who are desperate due to credit issues, high debt to income ratios issues, and those needing cash in a hurry.
Examples Of Predatory Lending Practices
Some examples of predatory lending practices from mortgage lenders is not disclosing proper disclosures required by law and overcharging fees and costs beyond the maximum allowed by law. Mortgage loan packing, mortgage flipping, asset based mortgage lending, and reverse redlining are other examples of predatory lending practices.
Not Disclosing Costs And Fees
Predatory lending practices also includes when a predatory lender does not disclose the actual true costs or hides the true costs and fails to disclose the risks associated with proceeding with the mortgage loan or changes the initial terms and rates of the mortgage loan without notifying the mortgage loan borrower with the changes in writing by redisclosing.
A mortgage lender cannot inflate the appraisal costs or other third party charges and make a profit on third party fees. Whatever the third party charges are, that is what the mortgage loan borrower pays. A mortgage loan originator or mortgage lender cannot accept referral fees, nor kickback whatsoever. Kickbacks and referral fees borders into committing a felony and is classified as mortgage fraud.
Choosing The Right Mortgage Loan Originator
A mortgage loan originator should be licensed. A mortgage loan originator cannot ask for a retainer or any upfront fees during the mortgage application process with the exception of an appraisal fee. Home inspection fees are up to the home buyer to pay. If a mortgage loan originator asks for upfront fees or retainer, he or she is in violation of predatory lending practices and should be reported to the appropriate authorities.