Tips for Consumers: Home Buyers Beware of Predatory Lenders
Tips for Consumers
Home Buyers Beware of Predatory Lenders
Horror stories about victims of predatory lending are everywhere in the media these days. Abusive or "predatory" lenders target people who are "house rich, but cash poor," that is, consumers who have built up a lot of value in their homes, but do not have much available cash. The types of loans offered usually have sky-high interest rates and fees.
Predatory lending is a set of lending practices that takes unfair advantage of consumers. Consumers in the Hagerstown area might end up taking out loans that they cannot afford, have deceptive or unclear terms in them, or cost so much that they ultimately lead to the loss of one's home. Here are some of the dishonest tactics:
Equity stripping occurs when a loan is made based on the equity in a property rather than on a borrower's ability to repay the loan. These loans usually result in the lender acquiring the borrower's home and any equity the borrower had in the home.
Packing is the practice of adding credit insurance or other "extras" to increase the profit on a loan.
Flipping occurs when a lender induces a borrower to repeatedly refinance a loan, often within a short time frame, charging high points and fees each time.
Traps are terms within the loan that will likely force the borrower to refinance or enter into foreclosure. Traps include balloon payments, negative amortization, prepayment penalties and mandatory arbitration.
How can you tell if a lender is a scammer? Here are some BBB tips:
_ Do business with lenders that you haven't checked out.
* Be rushed into signing a loan because it is a "Limited Time" offer. A lender in a hurry should serve as a warning sign.
* Sign documents with blank lines.
* Lie on your loan application or let the loan officers insert false information. * Lying on a mortgage application is fraud.
* Pay upfront fees without an explanation. Reputable brokers and lenders do not charge high upfront fees.
Check out the reliability of the company with the BBB. Go to www.bbbmd.org or call us 24 hours a day at (410) 347-3992. If you later have a problem, file a complaint.
* Shop around for the best loan.
* Borrow only the amount you need and can afford to pay back.
* Review all documents or have someone you trust review them for you.
* Know that you have three days to cancel loans signed on your home.
* File a complaint with the BBB, the attorney general office or the local Department of Consumers Affairs if you think you are the victim of a predatory loan.
To file a complaint visit: www.baltimore.bbb.org or write: BBB, 1414 Key Highway, #100, Baltimore MD 21230. Their office serves Baltimore and all of Greater Maryland.