During times of reduced income or financially difficult times, it is natural for homeowners to explore ways to reduce their monthly bills. Naturally, one may consider refinancing his or her home which may extend the terms of the contract or change the interest rate of the loan, thus reducing the monthly total. Unfortunately, not all lenders are equal. In fact, some even take advantage of prospective borrowers by using unfair, deceptive or fraudulent tactics to persuade them to take out a mortgage that is not in their best interest and could even be financially devastating. This is considered predatory lending, and federal laws, such as the Truth in Lending Act and Home Ownership and Equity Protection Act, prohibit it.
Too often, this deceptive practice leads homeowners into foreclosure when loan payments are impossible to keep up with. The best way to avoid falling victim to it is to be informed about the warning signs to look out for, and our Miami foreclosure defense firm is sharing them to help you stay protected.
Warning Signs of Predatory Lenders
If you suspect you are being offered an unsafe home loan by a lender guilty of predatory lending, it is important to consider other options. If a lender approaches you and performs any of the following actions, a red flag should be raised immediately:
- Claims loan details are too complex to be understood
- Refuses to discuss loan options or provide referrals to previous clients
- Falsifies records and numbers to “get you a better loan”
- Urges you to borrow more money than you are comfortable with
- Fails to provide the Good Faith Estimate required by law
- Asks you to sign blank documents
- Hastens you to sign mortgage documents before you read or understand them
Commonly Used Predatory Practices
Unfortunately, identifying the aforementioned warning signs is sometimes easier said than done. If you are worried that you have enlisted a lender who is acting deceptively, the following are practices to look out for:
- Loan Flipping: In return for refinancing a mortgage, the lender provides a loan. You may initially receive an influx of cash, but are then swamped by exorbitant refinancing costs, closing fees and other charges.
- Excessive Fees: Lender charges excessive and often hidden fees with a new or refinanced loan. In general, fees that are more than 1 percent of the total loan are unreasonable.
- Packing: Without your knowledge, lender packs extra charges and costs into a loan for products (typically insurance services) that are not needed and provide no benefit.
- Equity Stripping or Skimming: Lender offers to buy your home that is at risk of foreclosure and lease it back to you. However, you no longer hold any of the home’s equity and can be evicted by the lender at any time regardless of whether loan payments are current.
- Balloon Payments: Lender attracts you with low monthly mortgage payments, only to you charge you with a large, often unaffordable, lump sum payment at the end of the loan term.
- Bait-and-Switch: The loan terms you agreed to, are changed to benefit the lender right before it is time to sign the mortgage documents.
- Prepayment Penalties: Clauses hidden by the lender within the loan terms, which force you to pay a high penalty if the home loan is paid off early.
If predatory lending has caused you to fall behind on mortgage payments, our Miami foreclosure defense firm is here to help. We offer free consultations to those in financial turmoil. Contact our office today to schedule yours so that we can discuss your options and construct a plan for moving forward, together.