Predatory Lending Practices

Are You a Victim of Predatory Lending Practices?

By: Kenneth M. DeLashmutt

Help is available to borrowers who have claims against predatory lenders. Lenders all over the country are violating the Truth in Lending Act and other state laws regulating mortgage lenders and mortgage brokers.

If you are a victim of predatory lending or mortgage lender fraud, you may be able to void the mortgage and apply 100% of your payments to principal. You may also be able to recover money damages.

If the answer to any of the following questions is "yes," please get out your mortgage closing documents and audit your loan documents for violations.

1. Have you repeatedly refinanced your loan? Was the last refinance within the last 3 years?

A common predatory practice is flipping, which involves "repeatedly refinancing a mortgage loan without benefit to the borrower, in order to profit from high origination fees, closing costs, points, prepayment penalties and other charges, steadily eroding the borrower's equity in his or her home."

2. Did you increase rather than lower your rate upon refinancing?

3. Are you paying an interest rate in excess of 9.5%?

4. Was the loan obtained to pay for home improvement work that was not done properly, or even at all?

5. Have you had problems with the mortgage company regarding untimely posting of monthly payments? Sudden increases in payments? Adding amounts to your balance for insurance, "property preservation," or other "advances"? Does your principal balance never seem to go down?

6. Were you charged high closing costs (points and fees) on the mortgage?

7. Did the terms of the mortgage change to your detriment at the last minute before the closing?

8. Did the lender pay money to your mortgage broker (look on your HUD-1 Settlement Statement for a premium or POC [paid out of closing] or a yield spread premium or YSP)?

9. If you have an adjustable rate mortgage, were any adjustments done improperly? Can you even tell if the adjustments were correct or not?

10. Does your loan contain a prepayment penalty?

11. Do you believe you were treated unfairly by your mortgage company? Has correspondence with the mortgage company gone unanswered?

Mortgage companies have a statutory obligation to respond to complaints and requests for explanations of accounts. Often, they don't.

Each failure may entitle you to $2,000. If your claim against the mortgage company exceeds the number of monthly payments you allegedly missed, the mortgage company may not be able to prove that you are in default.

12. Did all collection letters sent to you by debt collectors comply with the Fair Debt Collection Practices Act? (Up to $1,000 more if they did not.)

13. Did you (or anyone else who has an ownership interest in and lives in the house) receive a "notice of right to cancel" that was not completely filled out?

14. Did you receive your copy of the loan documents at the closing (as opposed to being sent to you later or did the closing agent send you signed copies at all)?

15. Did you sign a document at the closing stating that you were not canceling?

16. Did the closing occur by mail, or at your home, or in another city?

There is a common assumption among judges, borrowers, and the public that mortgage companies do not desire to foreclose and acquire real estate. This assumption is no longer well founded.

There are an increasing number of scavengers that buy bad debts, including mortgages, for a fraction of face value and attempt to enforce them. Such entities profit by foreclosure.

"Mortgage sources confide that some unscrupulous lenders are purposely allowing certain borrowers to fall deeper into a financial hole from which they can't escape.

Why? Because it pushes these consumers into foreclosure, whereupon the lender grabs the house and sells it at a profit."
Robert I. Heady, The People's Money, "Foreclosure, You Must Avoid It," South Florida Sun-Sentinel, Feb. 25, 2002.

In addition, if the loan is guaranteed (by private mortgage insurance or the government), a mortgage company may find it more profitable to foreclose and make a claim on the guarantee.

By: Kenneth M. DeLashmutt, Author of the newsletter, Discover the Power of TILA, is a recognized Predatory Lending Defense Specialist and an authority on the subject of predatory lending practices,foreclosure defense, consumer protection and debtor's rights. He has more than 10 years experience in the area of consumer protection related to predatory mortgage lending practices and debt resolution.

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