Predatory Lending Through Loan Steering

Predatory Lending Through Loan Steering



Predatory Lending Through Loan Steering
With the​ real estate industry still in​ high gear from the​ last five years of​ skyrocketing prices and low interest rates,​ predatory lending is​ at​ an​ all time high .​
the​ term has no hard definition,​ but it​ generally refers to​ those lenders who go out of​ their way to​ offer loans to​ buyers at​ substantially higher prices than those buyers would be able to​ find elsewhere .​
Predatory lending is​ a​ profitable business,​ and it​ is​ often disguised as​ legitimate lending by unscrupulous lenders or​ their agents.
It often works like this: An agent working for a​ lender,​ perhaps on​ their own,​ tells a​ prospective loan applicant that he or​ she doesn't qualify for the​ mortgage for which they applied .​
the​ agent adds that not only will this lender not approve them for a​ mortgage,​ but in​ all likelihood,​ neither will any other major lender .​
the​ agent then assures the​ borrower that everything will be all right,​ because he knows of​ a​ lender that can get the​ customer a​ loan.
At that point,​ he refers the​ customer to​ this other lender,​ with whom he is​ working .​
This lender will make a​ loan available to​ the​ buyer,​ but the​ loan has a​ high interest rate,​ exceedingly high closing costs,​ and a​ prepayment penalty that will make it​ quite difficult for the​ buyer to​ refinance later .​
the​ buyer,​ not knowing any better and feeling as​ though he or​ she cannot do any better elsewhere,​ signs the​ contract and accepts the​ high-priced loan.
The shady dealings don't end there .​
Often,​ such predatory lenders are interested in​ not only the​ loan proceeds,​ but the​ property itself .​
By offering high priced loans to​ people who may have credit and/or income problems,​ the​ lenders may be banking on​ the​ buyer being unable to​ meet their monthly mortgage payment .​
Once the​ buyer defaults,​ the​ lender can take the​ property through foreclosure and sell it​ at​ a​ profit .​
the​ lender gets property that they can easily sell,​ and the​ agent gets a​ commission from the​ loan and another kickback once the​ house is​ sold .​
the​ buyer,​ unfortunately,​ is​ left with damaged credit and no place to​ live.
Loan steering,​ as​ this practice is​ called,​ is​ most common in​ areas where buyers are poor or​ have credit histories that may make them less likely to​ qualify for a​ loan with a​ major lender .​
the​ people who practice this form of​ predatory lending are easily able to​ take advantage of​ customers who either don't know any better or​ those who think they cannot find a​ better deal with another lender.
If a​ lender denies your loan application and assures you​ that no one else will lend to​ you​ and then offers to​ send you​ to​ someone who will,​ be suspicious .​
It's much easier to​ simply check with other lenders yourself than to​ fall into a​ predatory lending trap.




You Might Also Like:




No comments:

Powered by Blogger.