Recognizing predatory mortgage lenders

| Apr 26, 2021 | Real Estate Disputes |

The free-wheeling days of the early 2000’s — when just about anybody could get a mortgage loan, whether they could afford it or not — came to a crashing halt when the market collapsed.

Since then, a lot of people think that so-called predatory lenders have shaped up or closed down. In reality, they’re still out there. You need to know how to spot a problem lender before you get into a jam with your mortgage.

What are the warning signs that a mortgage broker isn’t trustworthy?

Frankly, you should be automatically wary of anybody that comes looking for your business, whether they stuck a flyer on your door or called you on the phone. Today’s real estate market is busy, and legitimate lenders have a lot of work on their hands already.

Other signs that you’re dealing with some kind of problem lender include:

  • Lots of fees: Lenders charge fees through “points” on a loan, and that’s normal in many situations — but you need to make sure that you’re not being charged an excessive amount in comparison to other lenders.
  • Credit amnesty: If a lender is telling you that your credit doesn’t matter, assume that they’re pulling a con — because credit absolutely does matter.
  • Balloon loans and prepayment penalties: These are two ways that people get stuck in a loan that they can’t afford. Given how changeable life can be, you don’t want to be locked into something like that.
  • Fudged numbers: If a lender ever says that a little white lie on your application about your income or debts is okay — get up and leave. That’s actually mortgage fraud.
  • Pushes and pressure: Again, lenders shouldn’t need your business right now — if your broker is pushing you to sign in a hurry or pressuring you to take on more debt than you think you can afford, you need to find someone else.

Predatory lenders will do just about anything to convince you to sign — including handing you blank forms that they promise to fill out for you later. Never sign anything that isn’t 100% clear — and make sure you know exactly what you’re getting.

What’s the best way to protect yourself from a predatory lender?

When you’re buying a home, a lot of things can go wrong. Working with an attorney can help you avoid major problems that could otherwise be financially devastating.