What is predatory lending?

Predatory lending is a practice that involves mortgage loan programs that are dishonest and deceiving to the consumer.  Excessive interest rates and fees, deceptive terms and conditions and pressure to refinance multiple times are all common signs of predatory lending practices.  Bankers want to help future homeowners avoid becoming victims by offering a resource they can use to identify and hopefully steer clear of predatory lenders.  In communities across America, people are losing their homes and their investments because of predatory lenders, appraisers, mortgage brokers and home improvement contractors who:

1. Sell properties for much more than they are worth using false appraisals.
   
   
2. Encourage borrowers to lie about their income, expenses, or 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 for cash-out refinance 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.