Predatory Lending

About Predatory Lending
Getting a loan for money can be very confusing. Not many people can call themselves experts in financial planning and debt can be scary. When people turn to lenders to help them get out of debt it is not with the knowledge that predatory loans may end up costing them excessive fees because of abusive practices. Our law firm has had great success in prosecuting consumer fraud class action cases. For more information please contact us to confer with a consumer fraud lawyer.

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Predatory Lending News Stories

States have recently passed laws to prevent instances of predatory lending that have mostly targeted unsophisticated consumers with high-interest loans stuffed with high cost pitfalls. First debated within the past couple years, predatory lending has been in the news a lot again recently as lenders and consumer advocates continue to battle over state bills.

Predatory Lending Lawsuit Settled, March 2003
First Alliance Mortgage Co. has been ordered to pay borrowers in a Court approved settlement of a predatory lending lawsuit. The predatory lending charges alleged that the company offered home equity loans that were targeted at consumers with marginal or poor credit ratings that normally do not qualify for a conventional loan. The company allegedly used deceptive business practices to entice consumers into taking out loans with large fees that added up to as large as 25% of the actual loan amount. First Alliance also allegedly misled consumers about increases in the interest rate and monthly payments on adjustable rate mortgage loans. For more information on consumer fraud lawsuits, including predatory lending, please contact us to confer with a consumer fraud attorney.

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Predatory Lending Prevention Bill Passed
March 4, 2003
A Senate committee in Frankfort, Kentucky cleared a bill that was proposed in hopes of preventing instances of predatory lending practices. Approved by the Senate Banking and Insurance Committee, the predatory lending bill will move to the full Senate and has already passed the House. This bill will forbid lenders from refinancing or consolidating a low-interest home loan subsidized by the government. A hidden fee must be disclosed with the bill in addition to lenders explaining to borrowers that falling behind on payments may mean losing their homes.

The Georgia House postponed a controversial predatory lending bill on March 3rd but is planning on debating the legislation today. If left the same, the predatory lending bill would eliminate crucial consumer protections from law, however consumer advocates will attempt to re-add some components back to the Senate. The Senate had previously passed a more pro-consumer predatory lending bill.

March 3, 2003
The Georgia House was waiting to vote on changes to Georgia laws put into place last year to help protect borrowers from predatory lending. In 2002, Georgia passed one of the country’s largest attempts to reduce predatory lending scams that most often target the poor and elderly. The lenders felt the 2002 Georgia predatory lending bill was too excessive. Lawmakers began to feel pressure from the industry in response, and when a State Rep. Showed support of a bill favored by lenders, activists responded as well. The pressure from both sides has continued up to today, the day of the vote. The senate has already passed its own bill that consumer advocates favor over the house version.

March 2, 2003
The Georgia predatory lending laws took effect five months ago, but now consumer advocates fear the law will be demolished. When passed last year, the Georgia Fair Lending Act was regarded as the nation’s toughest predatory lending law, but lenders argued it was too tough and made it difficult for certain consumers to get a mortgage at all. When credit-rating agencies announced they’d no longer rate mortgage backed securities containing Georgia home loans affected by the state’s predatory lending law, it resulted in a legislative battle. The Georgia House is scheduled to vote on a bill on March 3, 2003, and if the bill passes in the current form is will eliminate major consumer protections from the law.

February 28, 2003
In Indiana, a compromise bill on predatory lending cleared a House committee with just moderate support from housing advocates looking to ban predatory lending alongside lenders that fear over-regulation. There are still large differences remaining between consumer advocates and lenders.

February 27, 2003
The House and Senate have been considering widely varying versions of a predatory lending bill. Both predatory lending bills have been passed by their committees and differ in what loan costs and fees go into deciding a loan high cost. Senate version of the predatory lending bill says that loan companies cannot refinance loans within five years and bars lenders from loading loans with premiums for life, disability, or unemployment insurance, while the House version allows flipping every year and allows the practice referred to as packing.

The Senate committee approved a proposal intended to protect mainly the poor, minorities, and elderly from predatory lending. The legislation has been met after nearly two years after finally reaching a compromise amongst consumers, consumer advocates, and industry officials.

A Georgia committee in the state Legislature rejected a compromise predatory lending bill. Lawmakers have been receiving pressure from three major credit rating agencies that have said they may stop rating securities containing Georgia home loans affected by the law. Afraid of lawsuits, the rating agencies threatened to pull out of Georgia.

February 26, 2003
Advocates for senior citizens called for the Senate on February 25, 2003 to take action on a bill that would address the problem of predatory lending that seems to prey on the poor, elderly, and minorities. The Washington, D.C. based Center for Community Change made estimates predatory lending costs homeowners $3.1 billion every year.

New York Mayor Bloomberg reached an agreement with council members to postpone the effective date of the city’s predatory lending law. The predatory lending law was passed by the City Council in October in a unanimous vote of 41-5 over Bloomberg’s veto in hopes of ridding New York of predatory lenders. Consumer groups were upset with Bloomberg’s intervention on behalf of the lenders. One of the toughest local laws on predatory lending in the nation, the efforts to pass a bill to reduce predatory lending had been attempted for years.

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Recognizing Instances of Fraud, December 19, 2001
Knowing the difference between legal and illegal mortgage fees can save you money. Even mortgage lenders and brokers who are knowledgeable can be mistaken about the law.

Test Your Knowledge
Guess which scenarios you think are legal and which are not to test your knowledge:

Question: A broker charges an application fee, and you pay the fee, apply for the mortgage and get the paperwork rolling, but keep looking. You ask for your money back when you find a better deal, but the broker refuses and keeps the money, saying the fee was nonrefundable.

Answer: Legal- the broker charging an application fee.

Question: A lender pays a total of $24 to pull credit reports on you from each of the big three credit bureaus. The lender charges you a $45 credit report fee.

Answer: Illegal- violation of the Real Estate Settlement Procedures Act (RESPA)

Question: You buy your house from a builder who happens to own a title agency. You want to use another title agency, one of your choosing, and the builder charges a $300 fee for the privilege.

Answer: Illegal- violation of the Real Estate Settlement Procedures Act (RESPA)

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Protecting Yourself From Fraud, December 19, 2001
Many lenders try to lend people money they do not need or at abusive costs. Different efforts exist to curb predatory lending and there are steps to help protect people. People find themselves paying thousands of dollars in fees and paying monthly payments much higher than expected and the loan agent claims it is too late to undo the deal.

Regulators requested some of the fees be reversed, though the issue is really about lenders trying to lure borrowers into taking out loans with high interest rates and fees. A recent congressional hearing that involved dozens of consumers and consumer advocates testifying that elderly, poor, and unsophisticated borrowers are being victimized and losing their homes as a result. National, state, and local lawmakers have passed or have proposed law and rule changes that would outlaw the most abusive practices. Big lenders are revamping internal policies and dropping products considered to be abusive to consumers and attempting to be more responsive to complaints. Contact us to confer with a fraud lawyer.

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Recent Legislation Fighting Against Fraud

April 5, 2002
In April 2002, US Senator Charles E. Schumer releases a study showing black homeowners are more than four times as likely as white homeowners to rely on home mortgage loans from expensive subprime lenders. The Senator, a group of the city’s leading ministers, and the New York Bankers Association launches a new citywide program to provide loan and credit counseling for black homeowners that are being led to much more costly financing than white homeowners with equal incomes. The new program is called the Home Equity Lending Project (HELP) and brings the banks and churches across the city together to increase access to conventional loans for residents and break down the distrust black homeowners have developed and resulted in obtaining loans from costly subprime lenders.

The study also found black applicants experience a much larger rejection rate than white applicants when seeking loans from conventional lenders. Even in instances where the black applicants has greater incomes they were more likely to be rejected for a home purchase or refinance mortgage than white applicants with lower incomes. For more information contact us to speak with a fraud lawyer.

April 23, 2002
Predatory lenders normally target vulnerable people. Senator Paul S. Sarbanes, the Chairman of the Banking, Housing, and Urban Affairs Committee, announced he would hold a press conference on May 1, 2002 to outline predatory lending legislation he will introduce to the U.S. Senate. Unsuspecting victims of the fraud practices end up paying such high monthly payments that they can end up losing their home. Senator Sarbanes has made his focus eliminating predatory lending a large focus of his Chairmanship.

May 1, 2002
Senator Sarbanes announced the legislation to battle against predatory lending practices. The legislation is made to restrict abusive and fraudulent practices by enhancing civil remedies and statutory penalties. The predatory lenders often underwrite the property without establishing a borrower’s ability to repay the loan. The fraud practices allow the brokers or lender to make money by charging very high points and origination fees by packing other products into the loan so they can collect on high commissions. Sarbanes stated that “these lenders target lower income, elderly, and often, uneducated homeowners for their abusive practices. They overwhelmingly target minorities, driving a wedge between these families and the hope of a productive life in the economic and financial mainstream of America.” For more information CONTACT US to confer with a fraud lawyer.

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