Ramsey County

Making $ense of Dollars and Cents

June 29, 2009

What is Predatory Lending?

          If you listen carefully to all the dialogue about the home mortgage crisis, you will hear the phrase “predatory lending”.   What is predatory lending?  It is has many forms and many possible places along the road to homeownership where it can happen.  It may involve a mortgage lending company, an appraiser or a home improvement contractor who are looking not just for an appropriate business-related profit, but for a scam.

          Individuals or businesses involved in predatory lending might:

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

          - Encourage borrowers to lie about their income, expenses, or cash available for down payments in order to get a loan.

          - Knowingly lend more money than a borrower can afford to repay.

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

          - Charge fees for unnecessary or nonexistent products and services.

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

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

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

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

          - The cost or loan terms at closing are not what you agreed to.

          - Borrowers are told that refinancing will solve any existing credit or money problems.

          Predatory lenders often use emotion to insure a homeowner will agree to their offer.  A predatory lender or investor may tell you that they are your only chance of getting a loan or owning a home. You should be able to take your time to shop around and compare prices and houses.

          Predatory lending is another incidence where “buyer beware” can prevent volumes of problems.  For most people, buying a home happens only a few times in a lifetime – know what you are buying and signing for a welcome experience.

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524 4th Ave NE #5, 2nd Floor Ramsey County Courthouse
Devils Lake  ND  58301
701-662-7027
email - NDSU.Ramsey.Extension@ndsu.edu