Loan / Mortgage predators seek and find desperate people. They feed of homeowner's fear and desperation.

Their tactic is to dupe you into believing they are your only hope. But their goal is to get your home for nothing, boning you into a loan of unreasonable terms, so that you are paying and getting nowhere while they get rich.

 

How to Recognize a Predatory Lender

They are sly, slick, polite, and ingratiating. They "just want to help you, really!"

They may even have rationalized to themselves that they are "doing a good service for people needing help."

Make no mistake. The only thing they care about is how much money are they going to make off of you. You are an opportunity for them.

Below are some common tactics used by mortgage predators. WJFA has also provided some tips for protecting yourself.

 

Typical Actions of Mortgage Predators

1. Sell properties for much more than they are worth using false appraisals.

2. Encourage borrowers to lie about their income, expenses, or the cash available for down payments in order to get a loan.

3. Knowingly lend more money than a borrower can afford to repay.

4. Charge high interest rates to borrowers based on their race or national origin and not on their credit history.

5. Charge fees for unnecessary or nonexistent products and services.

6. Pressure borrowers to accept higher-risk loans such as balloon loans, interest only payments, and steep pre-payment penalties.

7. Target vulnerable borrowers to cash-out refinances offers when they know borrowers are in need of cash due to medical, unemployment or debt problems.

8. "Strip" homeowners' equity from their homes by convincing them to refinance again and again when there is no benefit to the borrower.

9. Use high pressure sales tactics to sell home improvements and then finance them at high interest rates.

 

Predators Standard Tactics

1. A lender or investor tells you that they are your only chance of getting a loan or owning a home. You should be able to take your time to shop around and compare prices and houses.

2. The house you are buying costs a lot more than other homes in the neighborhood, but is same size or quality.

3. You are asked to sign a sales contract or loan documents that are blank or that contain information which is not true.

4. You are told that the Federal Housing Administration insurance protects you against property defects or loan fraud - it does not.

5. The cost, or loan terms, at closing are not what you had agreed on with the lender.

6. You are told that refinancing can solve your credit or money problems.

7. You are told that you can only get a good deal on a home improvement if you finance it with them. They even try to convince you that they are the only honest person.

Protect Yourself - Be Prepared

1. Find honest and reputable real estate agents, banks, brokers, appraisers, inspectors and title companies.

2. Do not rush into something. Work with reputable, reliable and qualified people and then get a second opinion. Take your time. Sometimes you lose out on a house you want to buy because you didn't act quickly, but sometimes haste makes waste.

3. The same applies if you are refinancing your home. If you have a mortgage broker or loan officer telling you that you have to act quickly, that is a red flag, that something is not legitimate.

4. Basically, if it sounds too good to be true, it probably is.

5. Unsolicited contracts are always something to be wary of.

6. Check signatures on documents. Make sure they match and are of the same person.

7. Also, make sure checks are made out only by people that are a part of the transaction. Don't allow money to come in from non-buying parties.

8. Make sure your original asking price for the home is the same amount you mortgaged on the loan. An amount for more than what you're seek, could indicate a scam.

9. Ask for copies of the Seller's / Lender's Closing Statement from the escrow company. Compare the numbers to what is on the Buyer's Closing Statement.