Predatory Lending

Predatory lending is commonly defined as abusive lending practices that strip equity away from a homeowner. Predatory lending practices can include:

People with poor credit – higher-risk borrowers – will often pay more in interest and fees.

Targeting low-income people with poor credit and elderly homeowners with a large amount of equity in their home by making unsolicited telephone and mail offers and/or sending "checks" which if cashed, become a loan.

Using high pressure sales tactics. These high pressure tactics can include being led to believe that a prepayment penalty mortgage feature is a requirement, not an option. Read our prepayment penalty mortgage borrower information guide to better understand this mortgage option.

Stressing paying only the monthly interest on the loan, and consequently there is no equity build-up.

Extending a loan to a borrower while knowing the borrower does not have the capacity to repay it.

Not reporting good payment performance to the credit bureaus which is necessary for a borrower to improve his or her credit score and the likelihood of qualifying for a lower-cost loan.

Packing the loan with single premium credit insurance products, such as credit life insurance.

Repeatedly refinancing a loan within a short period of time and charging high points and fees with each refinance.

Questionable or Costly Business Practices and Traps

There are several types of abusive lending practices, scams or other questionable business practices that may strip equity away from a homeowner or place a consumer in financial hardship. What follows is helpful information you may use to avoid these pitfalls.



    Fannie Mae
    Freddie Mac
Ginnie Mae


Discussion Forum

Recent Posts -

By visiting Allie Mae you have taken your first step toward becoming an educated borrower. Allie Mae is an objective, independent source of information for the mortgage consumer. Whether you are buying a home, refinancing, taking a home equity loan, building a home or in need of a mortgage for any purpose, Allie Mae is here to help. Allie Mae has helped thousands of people with their mortgage needs. We have a complete selection of articles, charts, calculators, and checklists designed to help you through the mortgage and home buying process.

© 2004 Copyright AllieMae. All Rights Reserved.
Privacy Policy   Legal  Terms & Conditions   Webmaster   Site Map    Application
About   Contact Us   Forum   Dictionary   Calculators   Articles   Free Content