What is Predatory Lending?
Victims across the US are now facing foreclosure
Starting in 2001, shortly after the attacks on 9-11, banks and lenders dropped mortgage rates to stimulate the economy. During this period homeowners were refinanced into risky adjustable mortgages at an alarming rate. New homeowners were able to buy new homes with financing up to 100% of the home's value with a credit score as low as 500. Many times homeowners were sold on a loan that adjusted in 3 to 7 years. These mortgages are know as ARM (Adjustable Rate Mortgages).
Unemployment and Adjustable Rate Mortgages have resulted in mortgage payments that many homeowners can not afford. These are two major factors creating the foreclosure crisis sweeping across America today.
So what is predatory lending?
Predatory lending is the practice of making loans to consumers who have little ability to repay the loan. It involves the use of deceptive and/or high-cost consumer loans and equity-stripping mortgages.
Predatory loans can also include short term loans, personal loans and pay day loans. It is estimated that millions of homeowners have turned to pay day loans to make mortgage payments on time. This can lead to deeper debt and a vicious cycle of borrowing at high interest rates. Often times minorities, elderly and homeowners trying to save their home can become targets.
Below are some common predatory lending tactics.