Are You A Victim Of Predatory Lending??

Here Are 7 Signs of Predatory Lending:
source

Predatory mortgage lending involves a wide array of abusive practices. Here are brief descriptions of some of the most common.

• Excessive Fees
• Abusive Prepayment Penalties
• Kickbacks to Brokers (Yield Spread Premiums)
• Loan Flipping
• Unnecessary Products
• Mandatory Arbitration
• Steering & Targeting

Excessive fees

Points and fees are costs not directly reflected in interest rates. Because these costs can be financed, they are easy to disguise or downplay. On competitive loans, fees below 1% of the loan amount are typical. On predatory loans, fees totaling more than 5% of the loan amount are common.

Abusive prepayment penalties

Borrowers with higher-interest subprime loans have a strong incentive to refinance as soon as their credit improves. However, up to 80% of all subprime mortgages carry a prepayment penalty -- a fee for paying off a loan early. An abusive prepayment penalty typically is effective more than three years and/or costs more than six months’ interest. In the prime market, only about 2% of home loans carry prepayment penalties of any length.
>> More about prepayment penalties...

Kickbacks to brokers (yield spread premiums)

When brokers deliver a loan with an inflated interest rate (i.e., higher than the rate acceptable to the lender), the lender often pays a “yield spread premium" -- a kickback for making the loan more costly to the borrower.
>> More about yield spread premiums...

Loan flipping

A lender "flips" a borrower by refinancing a loan to generate fee income without providing any net tangible benefit to the borrower. Flipping can quickly drain borrower equity and increase monthly payments -- sometimes on homes that had previously been owned free of debt.

Unnecessary products

Sometimes borrowers may pay more than necessary because lenders sell and finance unnecessary insurance or other products along with the loan.

Mandatory arbitration

Some loan contracts require "mandatory arbitration," meaning that the borrowers are not allowed to seek legal remedies in a court if they find that their home is threatened by loans with illegal or abusive terms. Mandatory arbitration makes it much less likely that borrowers will receive fair and appropriate remedies in cases of wrongdoing.
>> More about mandatory arbitration...

Steering & Targeting

Predatory lenders may steer borrowers into subprime mortgages, even when the borrowers could qualify for a mainstream loan.Vulnerable borrowers may be subjected to aggressive sales tactics and sometimes outright fraud. Fannie Mae has estimated that up to half of borrowers with subprime mortgages could have qualified for loans with better terms.

According to a government study, over half (51%) of refinance mortgages in predominantly African-American neighborhoods are subprime loans, compared to only 9% of refinances in predominantly white neighborhoods.

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It is disheartening knowing people are taking advantage of the disadvantaged and the unknowing.
But take heart, The Center For Responsible Lending offers wisdom and assistance.
Click here and learn more.


Center for Responsible Lending

cartoon courtesy of Cartoon Stock

The "REAL" cost to own

I bought my house in 2001. I have to admit...that was one of the proudest days in my life. At the time it signified to me that I had accomplished a level of financial attainment that I honestly wasn't sure was going to happen. I knew that it would, but not that early. When your in high school your plan is for the most part is to go to college, get married, buy a house and have kids. Maybe not in that order but hey? The house was my last accomplishment. So we get the house...and head in for the closing. I sign a zillion papers telling me the house is mine. In the car before I headed to my new home, I begin to REALLY read the paperwork. My heart dropped when I realized how much I'm really paying for my 90k house.

Over $200,000 bucks. THATS PIMPING RIGHT THERE!

I had calculated the percentage rate I was given wrong. I was ignorant to what APR really meant. Over the next thirty years I will have paid over 200k for bungalow style home. Don't get wrong. I like my pad. 4 bdrms, finished basement, 2 car garage, nice yard. Plus I got a great deal. Old couple that lived there before was were the only tenants. But 200K?!?

My question is this. I understand that banks should make a nice bit of money to finance your house for you. But shuold they make more than double what you paid for the house? Thats loan sharking. Those of you who own homes...what did you think when you looked at that thick ass packet showing yor payments over the next 15 or 30 years, however long you financed your mortgage?

Finances are so important to understand. I didn't always do that until about 3 years ago when I got into trouble. Now that I've learned to make better decisions and not live for the moment but rather the future, I talk peoples heads off all the time when I see people wasting money. I'm surprised it has taken me this long to start blogging about money. I thank Bria for letting me be apart of the Oxygen blog.

So anyway, I thought I would give other examples of you really are getting hammered when you finance through banks if your credit is not top notch.

These numbers are crunched using a Annual Percentage Rate calculator which you can find anywhere using Google:

Using pre-established numbers:

House

Total Price for House- $115,000 financed at 6.25%

Closing Costs: $3,100
Monthly Payment: $708.07 not including local taxes & Home Owners Insurance
Total Interest Paid after 30 years: $139,910.47

Total Paid for house: $254,910.47


Car
Total Price for Car- $18,000
8% sales tax
lets say you have a $3000 trade in
You put $800 cash down
Finance the car for 48 months
11% Finance Rate

Total Interest you pay on the car- $3,762.75

And I'm sure if most of you look at your car paperwork. You probably have a higher rate than 11%.


Credit Card

$1,300 Balance
19% interest rate

With a $20 minimum payment It would take you almost 9 years to pay this off. A total of 105 payments. You may think that $1,300 is nothing. Well try having 3 or 4 credit cards with balances like that. Hit a bump in the road with your job, or your spouses job. Now your in a bind.


I'm not saying that credit is terrible. But it has to treated responsibly. Unfortunately I found that out late. But I have recovered through evaluating every financial move with caution. I can't blame the banks or the government for my inadequacies regarding managing credit. Although I have my reservations for their tactics, and what the government allows them charge. Basically they are in bed with each other. But it is up to you to educate yourself and your children to keep from going into debt.

Darkbrotha

darkbrotha.com