News from the Finance Office

Given the current economic climate, reports of people falling victim to predatory mortgage lenders continue to surface in the media. Predatory lenders typically target those with the desire for a residential property that is, realistically, beyond their means. Predatory lenders want these types of consumers because they have built up equity in the home, but do not have a lot of available cash.

Essentially, a predatory lender is someone who is deceptive and practices fraudulent lending to consumers. Predatory lenders convince borrowers to agree to loan terms that are unfair and abusive. These are considered predatory because they inevitably pin borrowers with high interest rates. Predatory lenders often target the elderly; however, anyone can fall victim to a predatory lender if they do not take the necessary precautions.

It is because of predatory lenders that consumers take out loans they cannot afford in the long run, which leads to them losing their home. There is some basic but important information you should be aware of when looking out for predatory mortgage lenders.

Equity stripping occurs if a loan is made based on the equity that has built up in the property instead of on the ability of the borrower to pay back the loan. The end result is the lender gets the home and any equity the borrower had in it. Packing is the process of adding credit insurance and any other extras the lender talks the buyer into or convinces them they need it in order to raise their profit on a loan.

Flipping is when the lender convinces the borrower to repeatedly refinance the loan, usually within a short period of time for a high fee. Traps are terms in the loan that usually force the borrower to refinance or foreclose. They trap the consumer in balloon payments, prepayment penalties and arbitration.

Before dealing with a mortgage lender, it is wise to have them checked out by the Better Business Bureau. Do not be fooled by limited time offers, and never sign a document with blank lines. Make sure every space is filled before you sign. Be honest when filling out an application because offering false information is fraudulent and illegal. Also, do not pay up front. Reputable lenders typically do not charge high upfront fees. It is also important to borrow just what you need and can afford to pay back. The most basic advice is to be cautious and do as much research as possible.

About the Author:

First Alliance Home Mortgage is New Jersey's premier Mortgage Banker/Broker. Their experienced Loan Officers provide clients with the latest information on special government programs, equity acceleration, and how to choose the type of loan that best suits their needs. http://www.fahmloans.com

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