Predatory Lending

Page 1

Information from the U.S. Department of Housing and Urban Development (HUD):
Don't Be A Victim Of Loan Fraud

Buying or refinancing your home may be one of the most important and complex financial decisions you'll ever make. Many lenders, appraisers, and real estate professionals stand ready to help you get a nice home and a great loan.

However, you need to understand the home buying process to be a smart consumer. Every year, misinformed homebuyers, often first time purchasers or seniors, become victims of predatory lending or loan fraud. Don't let this happen to you!

What is Predatory Lending?
In communities across America, people are losing their homes and their investments because of predatory lenders, appraisers, mortgage brokers and home improvement contractors who:

1. Sell properties for much more than they are worth using false appraisals.

2. Encourage borrowers to lie about their income, expenses, or cash available for downpayments in order to get a loan.

3. Knowingly lend more money than the borrower can afford to repay.

4. Charge high interest rates to borrowers based on their race or national origin and not on their credit history.

5. Charge fees for unnecessary or nonexistent products and services.

6. Pressure borrowers to accept higher risk loans such as balloon loans, interest only payments, and steep pre-payment penalties.

7. Target vulnerable borrowers to cash out refinances offers when they know borrowers are in need of cash due to medical, unemployment or debt problems.

8. "Strip" homeowners' equity from their homes by convincing them to refinance again and again when there is no benefit to the borrower.

9. Use high pressure sales tactics to sell home improvements and then finance them at high interest rates.

Page 2 What Tactics Do Predators Use?
Page 3 Tips On Being A Smart Consumer
Page 4 How To Avoid Predatory Lending

References:
www.hud.gov/offices/hsg/sfh/buying/loanfraud.cfm
U.S. Department of Housing and Urban Development
451 7th Street S.W., Washington, DC 20410
Telephone: (202) 708-1112 TTY: (202) 708-1455

Federal Laws
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Credit Bureau
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Directory of Federal Agencies
Federal Trade Commission (FTC)
Identity Theft
Predatory Lending
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Borrowers Beware

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