Frequently Asked Questions About Predatory Lending
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What is Predatory Lending?
Predatory Lending are abusive practices often used in the mortgage and lending industry that causes home owners and buyers to incur unreasonable fees and costs while borrowing money, strips borrowers of home equity and threatens families with bankruptcy and foreclosure.
Abusive loan practices can include:
Charging unreasonably high interest rates and fees;
including prepayment penalties;
Issuing loan payoff statements full of inflated and improper fees;
Failing to properly and timely credit loan payments;
Charging escrow fees not provided for in lending documents;
Making loans that consumers clearly cannot afford;
Breaking verbal promises or “bait and switch” at closing;
Loans with payments that start low and go high;
Loans with balloon payments;
Obtaining inflated appraisals to loan more than a home is worth;
Coaching you to lie or be dishonest on your loan application;
Putting you into a “stated income” or “no document loan;”
Loan “flipping” or constant refinancing;
“Hard Money” lending; or
Steering you to a high cost loan when you qualify for a lower one.
Am I a victim of Predatory Lending?
Perhaps. Do you recognize any of the signs above? Did you once have equity in your home but now owe more than it is worth? Are you in danger of foreclosure? If you are, there is a good chance you are victim of illegal Predatory Lending Practices, and we can help.
Is Predatory Lending illegal?
Yes! However, it often goes unchallenged for various reasons. Federal and state law protects you if you you have been a victim of Predatory Lending Practices.
What is Sub-Prime Lending?
Making loans at high rates of interest and attaching unwarranted high fees to less than the best or “prime” risk borrowers. Subprime borrowers are most at risk for Predatory Lending Schemes.
What is Hard Money Lending?
Making a Sub-Prime loan to a bad credit risk borrower, often solely based on the equity value in a home. Hard money lenders expect most borrowers to default and end up selling their home, or worse, end up in foreclosure.
Will my Predatory Loan cause me to lose my house?
It very well might if you fail to act quickly. Foreclosures in San Diego have recently spiked, and this is primamrily due to Predatory Lending practices.
Is there anything I can do about my Predatory Loan?
The best thing to do is to spot Predatory Lending before you close your loan. Failing that, the next best thing is to refinance out of it. However, if your home is worth less than you owe on it, and you are stuck in a Predatory Loan, your next best option is take legal action against the lender.
There can be no guarantee of results, but legal action can achieve many things, including, (1) restating the loan to more fair and favorable terms like lower interest rates, elimination of prepayment penalties, and payment free periods; and (2) win money damages from Predatory Lenders.
What if I mistated my income and assets on my loan application?
This is a common concern by consumers. If your lender encouraged you to mistate your income and assets on your loan application, you are victim of Predatory Lending! If your lender forged your signature to documents, or told you that you had to increase your income and assets in order to qualify for the loan, you are victim of Predatory Lending! If your lender inserted numbers on the application that makes it appear that you have a higher income or more assets than you do, you are victim of Predatory Lending!
If you mistated your income and assets on your loan application and that was strictly your own idea, this is not the best case, but lenders still have some responsibility to make sure you can afford the loan they offer.
What if I don’t want to bring a lawsuit against the lender? Is there anything else I can do?
If you can not do any of the things above, your next best bet is bankruptcy. In bankruptcy, you can slow down the foreclosure process, negotiate with the lender and manage the cancellation of debt tax liability. At Hyde & Swigart, we do not do bankruptcies, but if you call us we can refer you to a good bankruptcy attorney.
Can’t I just hand the property back to the lender or let it go into foreclosure?
You can, but this gives you few options to negotiate with lenders and manage your cancellation of your debt liability.
If the first trust deed forecloses, am I responsible for the second trust deed?
Perhaps, if the proceeds from the second trust deed were not used to buy your house. This would be the case if you took cash out from the loan, used it to refinance another loan, paid off other debts, your spent is some other way.
Will I have to go to court?
Probably not, but you may have to give a deposition or produce certain documents. We can help you through it all.
I am a senior citizen, should a mortgage company refinance me at my age? Is this predatory lending?
If the lender offers less favorable terms (larger down payments, shorter maturity dates on loans, higher interest rates, or under appraisal of real estate) for financial credit used to purchase or improve a home due to the consumer's age, then the lender has violated the law.