All across America, people are losing their homes and their investments because of predatory lenders, appraisers, mortgage brokers and home improvement contractors who:

-Sell properties for much more than they are worth using false appraisals.

-Encourage borrowers to lie about their income, expenses, or cash available for down payments in order to get a loan.

-Knowingly lend more money than a borrower can afford to repay.

-Charge high interest rates to borrowers based on their race or national origin and not on their credit history.

-Charge fees for unnecessary or nonexistent products and services.

-Pressure borrowers to accept higher-risk loans such as balloon loans, interest only payments, and steep pre-payment penalties.

-Target vulnerable borrowers to cash-out refinances offers when they know borrowers are in need of cash due to medical, unemployment or debt problems.

-"Strip" homeowners' equity from their homes by convincing them to refinance again and again when there is no benefit to the borrower.

-Use high pressure sales tactics to sell home improvements and then finance them at high interest rates.

Predatory lending practices can include equity stripping and loan flipping to hiding loan terms and packing a loan with extra charges.

Home Equity Stripping

Home Equity Stripping is where a lender suggests that you take an equity loan. Equity is the difference between the amount of loan you owe on the home and the amount you can get from selling the home. In the lending frenzy that was common just a few years ago many lenders made loans their underwriters knew were destined to default.

Many lender representatives and mortgage brokers listed or fabricated enhanced income in their clients' loan application forms to get the loan approved.  In most cases, the borrowers lacked the income and cash-flow to make the monthly loan payments and the loans quickly went into default and allowed the lenders to strip the equity from the property that the borrower may have taken a decade to build-up.

Loan Flipping

Loan Flipping is another sort of home equity loan scam, where a lender or mortgage broker persuades the borrower to refinance his loan repeatedly and borrow more money.

This practice is referred to as flipping, and it allows the lender to charge the borrower high points and fees each time the property is refinanced, and may also increase the interest rate. Consequently, with each refinancing, the borrower has increased the debt burden, and jeopardizes his ability to make monthly payments.

Credit Insurance Packing

Often, predatory lenders pack charges for credit life insurance, regular life insurance and other added services into the new mortgage. The lender may tell the borrower that this insurance comes with the loan, and doesn't explain how much extra money is added onto the monthly mortgage payment.

Fraud-related issues/Predatory lending indicators

1. Were you encouraged to include false information on your loan application?

2. Were you asked to leave signature lines or any other important line-item of any form blank? Did the lender or broker alter any information you entered on your loan application?

3. Check your loan file. Are any of the following disclosures missing?

Good Faith Estimate

Special Information Booklet (PDF)

Truth in Lending

HUD-1 Settlement Statement

4. Have you refinanced your loan several times and in each instance either your monthly payment and/or the total amount you owe on your home increased?

5. Do your documents reveal that your interest rate calculation will change to require you to pay "daily interest" in instances when your payments are late? Are there any pre-payment penalties if you want to pay off or refinance your loan (see article at www.freddiemac.com/singlefamily/pdf/ppm.pdf)?

6. Is your loan amount higher than the value of the home?

7. Did you incur any unexpected costs at settlement that were not explained to you prior to the settlement?

8. After settlement, were you surprised to find that the monthly payments on your mortgage loan were higher than you anticipated based on the initial disclosures?

9. If you have a balloon loan (one in which after a series of low payments the entire loan balance is due in a large lump sum), will you need to obtain another loan to finance that final lump-sum amount?

10. Were you required to buy credit insurance, insurance that will repay the debt if you die or become disabled? (Note: Credit insurance is optional and will not affect your loan decision if you decline to buy it. It can, however, add considerable cost to the loan transaction. You should decide carefully whether you are going to purchase credit insurance. See article at www.bankrate.com/brm/news/mtg/20010726a.asp).