The Mortgage Resources
Resources for generic homebuyer help programs and insurance requirements can be found on this page, as well. Predatory lending is a problem that affects a lot of people. Besides this article, there are many mortgage resources on the internet.
Predatory Lending Is A Type Of Predatory Lending
Despite widespread agreement that predatory or abusive lending tactics are immoral and should be stopped, there is a great deal of dispute on what exactly defines these types of activities among the real estate sector, consumer groups, and lawmakers. However, it is evident that a loan isn't predatory merely because it has an extremely high interest rate, which is a frequent aspect of many loans.
A dishonest home remodeling contractor or even plain fraud in the loan documentation are frequently involved in predatory loans, as well. Predatory loans are also known for "flipping" (repeated refinancing of debt in order to drain the borrower's equity by multiple commissions and charges); "packing" or other fraudulent non-disclosure (where loan terms or additional charges are financed or added to the transaction without the borrower's consent); and "failing down" or steering a borrower to a loan product that is worse for the borrower than other available loans, but more profitable for the lender/broker. Low-income, elderly, and minority borrowers, as well as naïve customers with money problems who have home equity, are common targets for equity predators.
Because of the lack of agreement on how to safeguard consumers while still allowing higher-risk borrowers access to credit, predatory lending is still an important subject to keep an eye on at the local, state, and federal levels.
Is There A Way Out?
How to deal with predatory lenders is a hotly debated topic. These loan initiators are plainly incorrect, yet there are firms that provide loan products to knowledgeable and willing high–risk consumers at higher interest rates or higher costs. This "subprime" financing is reasonable and required. In many cases, subprime loans are the sole choice for high–risk borrowers who require loans – such as those with limited, poor, or overextended credit.
Consumers who know they're taking on more risk by taking out loans know they'll pay more in interest or have other obligations as a result. Because they understand the risks of using subprime loans, they are willing to pay the higher fees connected with this market in order to get the money they need. Subprime borrowers face difficulties when lenders or contractors collaborate to take advantage of them.
Sadly, many of the solutions lately proposed by consumer organizations and politicians to combat predatory lending have been excessively broad. Subprime loans would have been severely curtailed, as well as customers' ability to get them, if these regulations had been in place.
What's Up With The Home Owners Equity Protection Act (HOEPA)?
The Home Owners Equity Protection Act (HOEPA) is the federal government's most recent effort to combat predatory lending practices. A high-cost mortgage with an interest rate of at least 8% above prime now comes with additional disclosure obligations and remedies for customers. HOEPA, on the other hand, is said to cover just 2% to 10% of subprime loans. All levels of government are enacting laws to show that they are still concerned that not enough is being done.