Predatory lending is the practice of using unfair, deceptive, and abusive tactics in lending money. Unscrupulous lenders in the mortgage industry may take advantage of borrowers who are less knowledgeable about lending practices by getting them to agree to loan terms that are undesirable and financially damaging. Mortgage lending is predatory when it has a significant adverse impact on a borrower’s life, either because the loan is inappropriate to the borrower’s situation, is grossly over-priced, or both. Most predatory lending is a perversion of a legitimate activity, and the definition of predatory lending involves who really benefits in the mortgage transaction. A legal mortgage can turn into a predatory lending practice if the homeowner does not benefit.
Predatory mortgage lending practices often strip borrowers of home equity and threaten families with foreclosure. These mortgage lenders often offer loans at very high interest rates, or they may include unfair prepayment penalties or balloon payments in a loan agreement. Often these terms are hidden within very technical language, making it difficult for the borrower to fully understand what he or she is agreeing to. Individuals from all backgrounds, income levels, and walks of life can become victims of predatory lending practices.
Predatory lending laws are gradually being integrated into the legal systems of the federal government and individual states. Over 35 states have already placed a legal limit on the maximum prepayment penalty that a homeowner should have to pay, and over half of the states have taken steps to limit predatory lending practices during the last five years. While the definition of predatory lending varies in each state, the awareness that individual citizens need to be protected from predatory lending under the law is growing.
If you have been a victim of predatory lending practices, an attorney may be able to help you bring a lawsuit against the mortgage company and/or banking institution and recover damages.