Avoiding Predatory Lending

When shopping for a mortgage loan, homebuyers need to be aware of predatory lending practices. These unscrupulous activities can increase the cost of homeownership and rob the borrower of equity in the home. Many predatory practices are illegal.

Predatory lenders may mislead the borrower about the true cost of a mortgage loan, fail to provide legally required disclosure documents or add unexpected, unnecessary and excessive costs at settlement.

Unethical lenders may involve borrowers in mortgage fraud by asking the borrower to provide false information on the loan application or leave important line items blank on the application. Fraud can also involve inflated home appraisals and the misuse of mortgage funds.

The best protection against predatory lending and mortgage fraud is to shop around for a mortgage loan. Ask questions and get explanations so that you have a complete understanding of the loan. Be sure you know the total borrowing cost over the life of the loan.

High-pressure sales tactics, including pressure to act quickly, can be signs of predatory lending. Deals that appear to be too good to be true generally are just that — too good to be true.