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Mortgages > Purchase

How to spot predatory loans
The Associated Press. Associated Press
Copyright Associated Press

Warning signs of predatory, or abusive, mortgage lending, according to the National Association of Consumer Advocates, which provides legal representation to consumers in court and administrative proceedings.

The group suggests that if your answer to any of the five questions is "yes," you may have a loan for which you are paying much more than you should and which could put your home at risk of foreclosure.

NACA also advises that if you are considering a loan with these terms, do not take it. Consumers should determine how big of a loan they really need and shop around for the best rate and terms. Consumers should never take a loan without getting several bids from different lenders, the group says:

Were you approached by a lender and asked to take out a loan against the equity in your home? Solicitations for predatory mortgage loans come in the mail, by telephone and from people knocking on doors.

Did they encourage you to make home improvements? Predatory lenders can increase the amount of a loan by convincing borrowers that their home needs a new porch, new windows or a new roof and then overcharging for the work.

Were you asked to refinance your first mortgage or to consolidate credit card debt in a home loan? Predatory lenders seek to increase their earnings by consolidating borrowers' debt into their loans and charging high interest rates and fees.

Was credit, life or disability insurance or another form of insurance included in the loan? These types of insurance, usually unnecessary, often involve high premium payments rolled into the cost of the mortgage loan.

Is there a prepayment penalty on the loan? Predatory lenders want you to keep paying high interest rates rather than paying off the loan early.

Apply now for a home loan!


On the Net: National Association of Consumer Advocates: http://www.naca.net
Reproduced with permission of the copyright owner. Further reproduction or distribution is prohibited without permission.
Dateline: Undated
Text Word Count 303

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