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Home » Business And Finance Articles » Credit Help For Mortgage Financing Beware Of Predatory Lenders

Credit Help For Mortgage Financing: Beware Of Predatory Lenders

Financing a new mortgage? Beware of "predatory lenders."

In November 2005, Montgomery County, Maryland's county council enacted legislation to expand the categories of discriminatory lending activities associated with discriminatory housing practices and increased the maximum fine for such activities from $5,000 to $500,000. The council sited practices such as charging inordinate amounts for prepayment penalties, points, and fees; steering borrowers toward more expensive mortgages; and refinancing existing mortgages with new ones that borrowers won't be able to repay based on their income or credit.

Predatory lenders typically target what's known as the nonprime mortgage market, where people with blemished credit records try to borrow money for homes in less desirable neighborhoods, which means that it's often minority groups, such as African-Americans and Latinos, who are the victims of predatory lending practices.

However, February 2006, the American Financial Services Association (AFSA), challenged the ruling, contending that only the state has the power to enact legislation regarding mortgage lending practices--although the AFSA went on record as opposing discriminatory and abusive lending practices. The new law was supposed to take effect the second week in March, but mortgage lender lawyers persuaded a judge to delay the new law, pending a hearing. So it's yet to be determined if the Montgomery County law will remain on the books.

Regardless of the outcome in Montgomery County, however, predatory lending practices are illegal in most states. The Center for Responsible Lending describes a number of such practices on their website. Some of them include loan flipping, in which the borrower is forced to refinance a loan, sometimes several times, solely for the purpose of generating new fees for the lending institution. Another common practice is insisting that borrowers also purchase such things as credit life insurance or other products--again, primarily designed to generate more income for the lender.

The bottom line is that there are lending institutions that make a great deal of money by charging extra fees to those borrowers who can least afford them, thereby either depriving those borrowers of the American dream of home ownership or, worse yet, setting them up for eventual foreclosure.

As the real estate market slows down and interest rates creep up, it's more important than ever to become a knowledgeable consumer. Learn the basics of mortgage lending, so you'll know when you're being charged too much for a loan or for things you don't need. Shop around to see what's available, and then make sure you're comfortable with your loan payment, because you'll be paying that amount for many years.

Copyright © 2006 Jeanette J. Fisher

And here is another random article you might be interested in...

Where Can I Get a Home Loan? Here Are The Top 5 Mortgage Lending Institutions

There are hundreds of sources for home loans online and right in your neighborhood. Banks, Credit Unions, Mortgage Bankers, Government Agencies and Private Sellers all offer different sources of financing for anyone shopping for a mortgage.

Neighborhood Banks

One of the best resources for getting a home loan is your neighborhood bank. Depending on the length of your relationship with the bank and the amount you have in you checking or savings account, you might be sent out letters and emails inviting you to apply for a loan. If you are generally satisfied with the quality of the service that you receive form your bank and they are offering a great interest rate, don't walk away.

Even if the offer is not quite what you're looking for, walk into the nearest branch, and ask to speak to a loan manager. Once you are there, make your case in person for why you would like a certain loan or feel that you deserve a better interest rate. Most banks, especially the ones in larger cities, are part of a larger conglomerate or depend on a large conglomerate to finance items such as a home loan. Go through the process with the loan officer, but don't be surprised if you don't get an answer on the spot. It might take a day or two.

Credit Unions

Some of the lowest rates on any type of loan product such as student loans, mortgages and personal loans can be found through a credit union. If you are eligible to join a credit union, sign up and set up a savings account with small monthly deposits. This way, you can use the resources of the credit union when needed.

Mortgage Bankers

These firms deal exclusively with home loans and give you the widest possible selection of home loan products. You can find local and national Mortgage Bankers by doing a quick search on Google or Yahoo. Go to the website of several different firms, fill out an online application and you can be approved in a few hours.

Government Agencies

The agencies that lend mortgage money include the Federal Housing Authority (FHA), Veteran's Administration (VA) and the Farmers Home Administration (FmHA). Contact each agency directly to see if you meet their requirements.

Private Sellers

An often overlooked financing alternative is to see if you can lease a property from a homeowner with an option to buy later on. If the homeowner has the resources, they can also finance your move in with a low interest loan.

Check out these resources individually or discuss your options with a loan officer.