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Predatory Lending Explained

foreclosure defense advocatesThere have been numerous newspaper articles, stories on television and internet articles concerning predatory lending issues. There seems to be a lot of confusion as to what constitutes predatory lending.

Predatory lending refers to practices engaged in by banks, mortgage companies, mortgage brokers, real estate agents and title representatives which involve dishonesty. Most consumers do not have an expertise regarding obtaining consumer mortgages for residential property. Predatory lending practices take advantage of the lack of knowledge prospective homeowners have when they seek to obtain mortgages to buy a home or refinance an existing mortgage. Predatory lending schemes can violate both federal and New York State law.

Examples of Various Predatory Lending Practices

  1. Preparing paperwork for homeowners for loans they cannot afford to make the payments on.
  2. Obtaining false inflated appraisals on homes.
  3. Convincing prospective homeowners to lie on their applications with regard to inflating their income.
  4. Engaging in racial profiling and convincing minority individuals to take out sub-prime mortgage loans.
  5. Charging excessive fees and expenses for preparation of the paperwork with regard to a mortgage application.
  6. Quoting one interest rate or set of terms regarding a mortgage and then later charging a higher interest rate or additional fees and charges.

Auditing Loan Documents

One of the methods to determine whether predatory lending was involved in a transaction and/or whether the loan and the closing on the transaction were handled properly is to obtain a loan audit. Loan audits can provide documentation with regard to predatory lending issues, violations of truth in lending laws, violation of New York State banking laws, fraudulent practices and other unethical or illegal aspects of the mortgage transaction.

Loan audits can show a variety of improper and bad practices engaged in by a financial institution and/or other individuals involved in the mortgage loan process. Among other things, the mortgage audit can reveal fraud on behalf of the financial institution and/or its employees or agents, misrepresentation with regard to the terms and circumstances of the loan, breaches by the financial institution of the contractual obligations and a variety of other issues which can be utilized as a defense to a foreclosure lawsuit.

Conclusion

There has been a lot of predatory lending in the past five to ten years by financial institutions. Just simply alleging predatory lending was involved in a transaction is not enough. The facts and circumstances of predatory lending must be proven.homeowner advocates on long island

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