Tell-Tale Signs of Predatory Mortgage Lenders

Subprime lenders have the dubious distinction of being categorized as predatory mortgage lenders. Predatory lenders are those who deceive vulnerable borrowers looking to refinance their home or buy a new home. They go after borrowers with a poor credit history and offer them loans at exorbitant rates and fees. Such mortgage companies often employ aggressive marketing tactics to trap gullible customers like senior citizens. This kind of lending was the main reason behind the subprime mortgage crisis that the country is slowly recovering from.

Aggressive direct marketing

Never approach lenders who solicit you through mails, telling you that they have a 'loan just for you' or that you have been 'pre approved' for a loan. Don't pay attention to flyers left on your doorstep or car windshield, advertising mortgage lenders. Another marketing technique employed by such dubious lenders is to constantly bombard people with mails.

The easiest way to identify predatory mortgage companies is when they offer you instant loans that come with high fees and interest rates. The customer service representatives from such lending companies will often coax you to sign the loan agreement document after the very first meeting.

High interest rates

The representative will try and convince you that your bad credit history will not be taken into consideration and offer you exorbitant interest rates in the range of 9% to 20%, which are typical subprime rates. Another practice followed by predatory lenders is to pressurize borrowers with decent credit into getting high loan amounts with subprime interest rates.

These lenders usually offer loans depending only on the equity in the borrower's home without sparing a thought about the borrower's financial capability to pay back the loan. They will encourage you to borrow a higher amount than what you require and lure you into accepting loan terms that cannot be realistically met. Such a mortgage almost always ends up in foreclosure, with the borrower losing both his home and his money.

Lack of disclosures

Predatory lenders may also fail to provide you with the necessary disclosures and may not meet several other provisions that have been put in place for consumer protection. They may even offer you one set of terms during loan signing and then present a different set at the time of loan closing.

Don't let yourself be duped by the smooth talk and aggressive marketing. You may find yourself deep in debt if you fail to identify a predatory lender. Once you have signed on the agreement, walking away from the deal could cost you a lot in penalty fees. To double check the mortgage lender's credentials, approach the Better Business Bureau. They will assist you in verifying the credibility of the lender. Also make sure that the lender you approach has a license to operate from your state.

Taking out a mortgage is an important decisions so make sure you do your homework on the different mortgage companies in your area and avoid falling into the trap of any unethical companies that are looking to dupe customers.


For more information on home equity loans or to talk to mortgage brokers, contact Canadian Mortgages Inc