“Predatory lending practices target vulnerable consumers like women or those who do not qualify for conventional loans”(n.d). It targets groups who can’t really afford the repayment. It’s the concept of given more than we can handle by confusing the client in a very deceiving way. Below are examples of different types of predatory practices as listed by the FDIC:
• Bait-and-switch schemes: This type of scheme is when the lender promises a interest rate and with changes is for no apparent reason on the documents without any reason. Normally the change is to a higher interest rate.
• "Equity stripping": When the lender suggests and encourages borrowing against the equity of your home. The lender knows that there are fees involved and the payment cannot be afforded thus possibly losing your home to the lender.
• "Loan flipping": The lender encourages you to get additional cash by refinancing your mortgage again and again. Allowing lenders to continue to recollect fees, increase you’re debt and putting you at risk to lose your property.
• Home improvement scams: “A contractor talks you into costly or unnecessary repairs, steers you to a high-cost mortgage lender to finance the job, and arranges for the loan proceeds to be sent directly to the contractor. All too often, the contractor performs shoddy or incomplete work, and the homeowner is stuck paying off a long-term loan where the house is at risk.”
• Mortgage servicing scams: In this type of scam you’re told you owe additional money for insurance, legal fees, taxes or late fees.
Many argue that today’s economic state is directly influenced by the housing bubble of the late 90’s and early 2000’s. During that time there was a lot of profit that was being made. Mortgage companies were using predatory practices in order to achieve their goals. On the other side many consumers were, thanks to the predatory practices of mortgage companies, were giving more then what they could handle. This led to houses being overpriced, consumers defaulting on their mortgages and eventually record high foreclosures.
Should the debtor or borrower bear some responsibility, at least in some instances? These types of tactics put the borrower at a disadvantage. As a borrower we should understand what we are signing and what we are agreeing to. A borrower must take all necessary steps in…