What are Predatory Lending Practices?

Philadelphia Predatory Lending Task Force
“Helping to keep residents informed and protected”

WHAT ARE PREDATORY LENDING PRACTICES?
Home Message from the Chairperson Contact Us Members What are Predatory Lending Practices? Actual Cases	*There has been some difficulty defining just what predatory practices are.* Federal state and local laws can define what they are as well as administrative and regulatory agencies such as the U.S. Department of Housing & Urban Development (HUD), the state Banking Commission, the Federal Reserve Board and others. *Always check with someone who knows in your region to be sure* because the definition may also change from city to city and from state to state. In Philadelphia, as an example, a bill has been introduced in City Council that seeks to define the practice. The bill has not yet passed .When in doubt, contact a housing counseling agency, HUD, a legal clinic or financial advisor. In general, however, there are some things that consumers can watch for in connection with loan transactions which should make you take notice and contact a person trained to identify possible red flags.	Most abuses have been seen in: HOME EQUITY, HOME IMROVEMENT LOANS AND SECOND MORTGAGES, and have had several of these characteristics: HIGH COSTS Very high costs and fees: points, application fees, origination fees, ‘miscellaneous’ fees. Unusually high costs such as points, origination and other fees. HIGH INTEREST RATE Check current rates—know your credit history to see if you qualify for the best rate. A really high rate can be a red flag Check current rates. Stay informed about your credit report. Know if you are eligible for the best rates. FINANCING INSURANCE While escrowing for homeowners insurance in a mortgage is typical, be leery of requirements to purchase credit, life and other types of insurance. While escrowing for homeowners insurance is typical, requiring credit, life or other types of insurance may be a red flag. BALLOON PAYMENTS These loans usually allow you to pay a lower payment monthly, but expect a lump sum payment of the entire balance at a future date. HIGH MONTHLY PAYMENT Be careful to not take on a payment you cannot afford. PURCHASE OF UNEEDED REPAIRS Purchase only the repairs you need. The interest you pay on your loan can be costly