Foreclosure
Step 4. Protect Yourself From Predatory Lenders
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- Excessive fees
Charges and fees are costs not directly reflected in interest rates. Because these costs can be financed, they are easy to disguise or downplay. On competitive loans, fees below 1% of the loan amount are typical. It is not uncommon to see fees totaling more than 5% of the loan amount on predatory loans. - Abusive prepayment penalties
Up to 80% of all sub-prime mortgages carry a prepayment penalty -- a fee for paying off a loan early. Make sure you know precisely what the prepayment penalties are before signing the dotted lines.
Some penalties interests cost more than 6 months’ interest payment so be sure to find out. - Kickbacks to brokers (yield spread premiums)
When brokers close a loan with an inflated interest rate (i.e., higher than the standard rate for the lender), the lender often pays a “yield spread premium" -- a kickback for making the loan more costly to the borrower. Make sure that you shop around to get a good feel for the market and what the average interest rate should be with your credit profile. - Loan flipping
A lender "flips" a borrower by refinancing a loan to generate fee income without providing any net tangible benefit to the borrower. Flipping can quickly drain borrower equity and increase monthly payments -- sometimes on homes that had previously been owned free of debt. - Unnecessary products
Sometimes borrowers may pay more than necessary because lenders sell and finance unnecessary insurance or other products along with the loan. - Mandatory arbitration
Some loan contracts require "mandatory arbitration," meaning that the borrowers are not allowed to seek legal remedies in a court if they find that their home is threatened by loans with illegal or abusive terms. Mandatory arbitration makes it much less likely that borrowers will receive fair and appropriate remedies in cases of wrongdoing. - Steering & Targeting
Predatory lenders may steer borrowers into sub-prime mortgages, even when the borrowers could qualify for a mainstream loan. Vulnerable borrowers may be subjected to aggressive sales tactics and sometimes outright fraud. Fannie Mae estimated that up to half of borrowers with sub-prime mortgages could have qualified for loans with better terms.
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Foreclosure - Content
1. 10 Tip To Be A Smart Consumer
2. What Can Home Owners do to protect themselves from foreclosures?
3. Beware of Predatory Lendings
4. Protect Yourself From Predatory Lenders
5. Other Tactics Predatory Lenders Use That You Should Know
6. What Happens When You Miss A Mortgage Payment?
7. What Should You Do If You Find Yourself Unable To Make Mortgage Payment?
8. What Are My Options?
9. How Do I Know If I Qualify AND Should I be Aware of Anything Else?
10. Are There Any Precautions I Can Take?
11. Introduction
12. Top 10 Foreclosure Myths
1. 10 Tip To Be A Smart Consumer
2. What Can Home Owners do to protect themselves from foreclosures?
3. Beware of Predatory Lendings
4. Protect Yourself From Predatory Lenders
5. Other Tactics Predatory Lenders Use That You Should Know
6. What Happens When You Miss A Mortgage Payment?
7. What Should You Do If You Find Yourself Unable To Make Mortgage Payment?
8. What Are My Options?
9. How Do I Know If I Qualify AND Should I be Aware of Anything Else?
10. Are There Any Precautions I Can Take?
11. Introduction
12. Top 10 Foreclosure Myths
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