What is predatory mortgage lending?Answer:
Predatory mortgage lending is the practice of lenders to knowingly force borrowers into unfavorable loans.
Popular predatory mortgage lending examples include contract chicanery, equity stripping, unnecessary cash-out refinances or debt consolidation loans, home improvement scams, and credit insurance. Property and loan flipping, negative amortization loans and yield spread premiums are also widely spread predatory mortgage lending practices.
Anti-predatory lending law bill has been enacted to protect borrowers - especially those with bad credit and poor finances who cannot qualify for prime loans. Borrowers are protected by the federal Home Ownership and Equity Protection Act (HOEPA) and are also obligated to receive counseling to avoid most common predatory lending practices.
Statistics shows that even though not every subprime loan is predatory, most predatory loans are subprime. Special provisions have been provided to discourage lenders from slipping hefty prepayment penalties in adjustable rate mortgage agreements.
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