Question:

Are there common cases of predatory lending?

Answer:

Predatory lending can be practiced by either large or small lenders or brokers. General cases of predatory lending begin from slipping harmful provisions to the borrower in the contract to foreclosure help scams.

Most Expensive Cases of Predatory Lending

Excessive broker/lender fees result in the subprime loan origination. For a loan of $100,000 you could be charged $10,000 in broker fee, which is highly unacceptable.

Fees rolled into the loan cannot be recovered. Instead of paying around 2% origination fees and discount points, you may be charged 4 or 5% and simply have those rolled in the loan. The bad news is even if you refinance, you cannot recover those fees.

Another expensive form of predatory lending is debt consolidation. While in this case payments are in fact reduced, short term debt is traded for 30-year long debt and can costs two times as much until repaid.

A predatory lender may structure your loan with a balloon payment due after 10 or 15 years without informing the borrowers. Make sure you know your mortgage terms to the letter, or you could end up with a balloon payment you can't afford and lose your home.

Popular cases of predatory lending are equity stripping through refinancing, or through allowing a loan amount exceeding the capacity of the borrower to repay the loan.

Adding costly and fancy credit insurance in the loan is another popular predatory lending practice.

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