What is predatory lending? Our definition is any lending situation that is not structured in the best interests of the borrower.
Here are some warning signs. Does your lender or broker…
- Claim that the loan details are too complicated for you to understand?
- Charge any fees that are noticeably higher than the fees of other lenders?
- Refuse to discuss loan options with you?
- Refuse to disclose the source of the funding for your loan (if you’re working with a broker)?
- Claim that he is your “only shot” at getting a mortgage?
- Pressure you into signing documents before you read or understand them?
- Fail to provide you with a Good Faith Estimate, or other documents required by law?
- Refuse to provide you with referrals to previous clients.
- Suggest that he can get you a better loan by falsifying or “fudging” records or numbers?
- Ask you to sign a blank or partially blank document, saying that she will “fill in the blanks” later?
- Try to convince you to borrow more money than you’re comfortable with?
What if I suspect I’m working with a predatory lender?
Even if you’re worried about losing your one shot at your dream house, do not move forward with the loan. Trust your instincts and take some time to back away and re-evaluate the situation. Here are some things you can do to gain perspective:
- Examine your paperwork: Look for blank areas or documents near signature lines, dollar amounts that do not match the amount you are trying to borrow, and fees that are higher than normal. For instance, most loan origination fees are around 1% or less of the mortgage amount. An origination fee that is noticeably higher than this is cause for concern.
- Talk to your real estate agent: If you have concerns about your lender, your agent may be able to provide some much-needed perspective. Maybe your fears are just a normal case of home-buying jitters. Maybe not. An experienced agent should know the difference. Of course, if your agent recommended your lender to you, this may not be the best option.
- Talk to another lender: You always have the right to a second opinion. Try getting a referral for another lender from a friend or family member that you trust. Talking to another lender may soothe your fears, or confirm your suspicions.
- Contact a state or federal resource: The Department of Housing and Urban Development (HUD) has a list of local resources, by state, that can help you if you think your lender is doing something unethical or illegal.
- Contact the Department of Housing and Urban Development (HUD): You can email the HUD directly to report a problem with your lender.
- Contact the FBI: Mortgage fraud is a crime. If you suspect that you’re a victim, contact the FBI.