Foreclosure Basics

If you’re a victim then don’t be a victim twice and let them take your home. Fight for your rights.

Predatory lending is one of the most important defenses that you can use to stop foreclosure. Unfortunately, many people will lose their home to foreclosure without ever knowing that they could have saved it by suing their lender for federal law violations such as the Truth in Lending Act (TILA) and the Real Estate Settlement and Procedures Act (RESPA) and other individual state laws.

If it is found that your lender has violated these laws, you may be able to sue your lender and win substantial damages that may include all the payments made (interest), all lender costs associated with the origination of the loan, $2,000 in damages per violation, attorney fees and have your bad loan wiped out (rescinded) and replaced with a new loan by a new lender.

Yes, this is a BIG deal! So please, pay attention, read carefully and get educated, so you can fight back against your lender and win.

Predatory lending is defined as intentionally placing consumers in loan products with significantly worse terms and/or higher costs than loans offered to similarly qualified consumers in the region for the primary purpose of enriching the originator and with little or no regard for the costs to the consumer.

This happens ALL the time and there is a good chance that this may have happened to you.

These laws are in place to protect consumers (you) against unscrupulous lenders and mortgage brokers. You need to understand the basics of these laws and what they can do to help you save your home and avoid foreclosure.

So, lets go over some basic signs to look out for and indentify if you might be the victim of predatory lending.

  • Bait and Switch- This is the most common tactic that is used by mortgage brokers and lenders. You’re sold on the phone by a smooth talking loan officer that tells you everything you want to hear and “locks” you in the loan by offering you the “best” rate under the sun. They may tell you not to make your mortgage payment (used as a tactic to make sure you take the loan, no matter what). Things move quickly and before you know it, it’s time to sign loan documents and that great rate that was promised in the beginning, suddenly is 1-3 percentage points higher and the broker or lender fees have doubled from what was promised when they originally “sold” you on the mortgage they were offering.
  • Truth in Lending Act (TILA) -  The Truth in Lending Act is the most powerful tool that you can use to save your home. The law requires lenders that advertise credit terms to disclose these key lending terms. Also, the law entitles the consumer the right to rescind certain credit transactions under certain circumstances, such as home quity loan. The Truth In Lending Act is designed to reduce confusion among consumers resulting from the different methods of computing interest and prevent fraud, deception and unfair business practices. It does not require creditors to calculate their credit charges in any particular way. However, whatever alternative they use, they must disclose certain basic information so that the consumer can understand exactly what the credit costs. The Truth in Lending Act is implemented by the Federal Reserve Board.

The penalties for failure to comply with the Truth In Lending Act can be substantial. A creditor who violates the disclosure requirements may be sued for twice the amount of the total finance charge on the loan. In the case of a home mortgage, this can be a very significant amount. Costs and attorney’s fees may also be awarded to the consumer. A lawsuit must be begun by the consumer within a year of the violation, but certain tolling provisions apply giving the consumer more time and up to 3 years to file suit.

Mortgage law attorneys are using Truth in in Lending Act violations to stop foreclosure for homeowners across the country. Don’t you think it may be wise to investigate your loan and see if your are a victim?

Here are the 7 signs of predatory lending from the Center of Responsible Lending (CRL)-

1. 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.

2. 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.

3. 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.

4. 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.

5. Unnecessary products

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

6. 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.

7. 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.

Return for Stop Foreclosure Because of Predatory Lending  to the Home Page


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