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The Dangers of Predatory Lending and Loan Fraud
Copyright (c) 2006-2012 Vasrue.com, All Rights Reserved
Written by: Robert Wade
Predatory lending in an unregulated practice typically affecting women, minorities and elderly individuals. This practice involves unfair, discriminatory lending practices, often for mortgage or refinance loans, including (but not limited to):
1. Risk-based pricing: When you're charged higher fees and/or interest based on the company's undisclosed credit risk borrowing policy.
2. Negotiable Loan Pricing: When a loan's pricing structure, interest rates or other charges are flexible or negotiable.
3. Single Premium Credit Insurance: When single premium credit insurance, which is much more expensive than alternatives, is financed into a loan. Lenders may also require a buyer purchase other unnecessary insurance or products to ensure loan approval.
4. Non-APR Fees: When additional or excessive fees are added to a loan and not calculated in the Annual Percentage Rate.
5. Steering or Targeting: When borrowers are encouraged to accept sub-prime mortgages even when they qualify for mainstream loan terms. Up to half of all sub-prime mortgage holders, according to Fannie Mae, qualified for better termed loans.
6. Loan Flipping: When a lender asks a borrower to refinance their loan, introducing fee income without benefits to the borrower, draining owner equity and increasing their monthly payment.
Loan fraud feeds on consumer ignorance, often devastating its victims and, in many cases, leaving them homeless and stripped of the equity they've spent a lifetime to build. Making matters worse, loan fraud is on the rise. These predators look for desperate home owners, most behind on their payments or near foreclosure. They may offer to take over payments for a few months until the homeowner gets back on his or her feet. These homeowners, trusting the company is legitimate, sign blank or incomplete paperwork. Others sign forms without reading the terms. A few months down the road, they're asked to vacate their property, learning the hard way that they signed over their home to a thief.
What can you do to avoid victimization? First, educate yourself through HUD homeownership courses, non-profit counseling agencies or by reading information online. Interview several real estate agents and check references. Similarly, shop around for a legitimate lender, check with the Better Business Bureau and compare each company's costs. Hire qualified and licensed home inspectors before making the purchase. Don't make false statements on your loan application, borrow money to repay or sign blank or incomplete contracts. Finally, read everything you sign and understand the terms.
Predatory lending and loan fraud are on the rise, and these criminals cheat borrowers out of more than $25 billion each year, according to the Center for Responsible Lending. Arm yourself with knowledge and use your intuition. If it sounds too good to be true, it probably is.
Copyright (c) 2008 http://www.Vasrue.com, All Rights Reserved.
Robert Wade writes about Personal Finance for the Vasrue website. Articles are published weekly on Travel, Real-Estate, E-business, Credit and a host of other great topics. All Vasrue articles are available to other webmasters through RSS feeds. Visit the Vasrue.com website often, to learn something new.
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Word Count: 443
Total Views: 1264
Views This Month: 33
Views Last Month: 28
Article Rating: 3.13 of 5
Votes Cast: 8
Author Overall Stats:
Times Viewed Overall: 9967
Author Rating: 2.68 of 5
Votes Cast Overall: 73
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