Predatory lending strips borrowers of home equity and
threatens families with foreclosure. Often borrowers are deceived
into accepting unfair loan terms, usually through aggressive sales
tactics. Often they are taken advantage of because of their lack of
understanding of terms and involvement in complicated transactions.
Even more informed consumers are occasionally fooled. Anecdotal
information suggests predatory lending is concentrated in poor and
minority communities, where better loans are not readily available.
Signals of predatory lending practices include, but are not limited
to:
- Aggressive and deceptive marketing
- Making loans without ample consideration to the borrower's
ability to pay
- Financing excessive fees into loans
- Charging higher interest rates than a borrower's credit
allows
- Home improvement scams
Among the factors that contribute to predatory lending are
the steering of minorities toward the subprime market, even when
they qualify for prime loans with better terms, an inadequate number
of mainstream lending institutions in minority neighborhoods, and a
general lack of information in minority communities about available
mortgage products.
Many consumers have already fallen prey to these lenders.
Read more about HUD research and reports on predatory
lending.
HUD is taking an active role in curbing predatory lending
practices. This includes strategies to: 1) Improve consumer literacy
and disclosures; 2) Prohibit harmful sales practices in the mortgage
market; 3) Restrict abusive terms and conditions on high cost loans;
4) Improve market structure. Learn more about HUD's efforts to curb
predatory lending. |