Predatory lending was one of the catalysts of the subprime mortgage crisis that occurred from the end of 2007 to 2009. Many predatory lending practices were prohibited under state and federal law after the mortgage crisis. However, despite the increased regulation on mortgage lenders, some lenders may still engage in some practices that can be described as predatory.
Lenders who engage in predatory lending practices usually attempt to take advantage of borrowers who have limited access to other lending sources. These are borrowers with low credit scores, shaky employment history, or past financial problems, such as foreclosure or bankruptcy. Because borrowers with these problems may feel as though they have no other options to borrow the money they need to make homeownership a reality, they may agree to astronomical fees and points on loans, and be charged higher interest rates. Lenders may also convince the borrowers to take on loans that are more than the borrower can afford to repay, and fail to provide the borrower with all the contractual terms and information they would need to make an informed decision, essentially setting the borrower up for a foreclosure later on.
First time homebuyers should avoid lenders who engage in predatory lending practices in order to reduce their chances of ending up in foreclosure. Borrowers have a right to know what they are getting into, and should never sign any documents that contain terms that they do not understand, or that the lender is insisting they sign without reviewing. Borrowers who are encouraged by a lender to provide false information on their loan applications to ensure approval should avoid taking a loan from that lender. Borrowers should also look out for terms that levy penalties on then for prepaying on their mortgages. For high-cost loans, prepayment penalties are prohibited under law, unless certain conditions are met.
If a homeowner in foreclosure can prove that the lender engaged in unfair lending practices, especially as relates to disclosures about the nature of the loan and fees, the borrower may have a defense to a foreclosure. If the lender engaged in practices that were prohibited under state or federal law, and the violations are found to be serious enough, the borrower may be allowed to rescind the mortgage loan. This does not mean that the homeowner retains their home without having to pay on the mortgage, but it leaves the homeowner in a better position in terms of not owing any money under the terms of the rescinded loan, and not having a foreclosure on their credit history. Once a loan is rescinded, the borrower may be required to repay money that was previously advanced to the lender.
Contact Us For Legal Assistance
If you have received a notice of foreclosure, or are currently going through foreclosure, you may have a defense if your mortgage lender engaged in predatory lending practices against the law. For more information on how you may defend against a foreclosure, contact the North Miami foreclosure attorneys at Charlip Law Group, L.C. for a consultation.
