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AARP Policy Book

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Home Loan Options

Predatory Mortgage and Home Improvement Lending

Taking a loan shouldn't mean losing your home

If you're thinking about borrowing money, be certain you're not borrowing trouble with it. Sure, there may be advantages to using your home equity when you need a loan, but the advantages disappear if you pay unfair interest rates or huge fees on that loan. And it's not just the loan itself you need to scrutinize. You also need to make sure the lender isn't out to pressure you into making a bad decision.

Where we stand on preventing fraud in mortgage and home improvement lending

You've got to be careful, especially when borrowing against your home. Predatory home mortgage lenders often promote their services to homeowners who may be financially distressed. They sometimes market to people who may need to consolidate bills or pay for home repairs. Predatory lenders use aggressive sales tactics, inflated interest rates, outrageous fees and unaffordable repayment terms. As a homeowner, you can end up with a loan you cannot afford to repay. Which puts you at risk of losing your home to foreclosure. Laws should be passed so this doesn't happen.

Predatory loans against your home may also contain hidden fees, extremely high interest rates, punitive prepayment penalties, or outrageous default penalties. Or you may be unfairly sold single premium credit insurance products or get caught in a spiral of refinanced debt with high interest rates and fees.

Consumers should have federal and state protection so they know the cost of refinancing a mortgage compared with the cost of getting a separate loan. Washington and the states should restrict, or at least limit, punitive prepayment penalties, high interest rates and fees, inappropriate credit insurance products, and frequent refinancing ("loan flipping") that does not benefit the borrower.

AARP believes the federal government should regulate unfair and deceptive practices in which someone's home serves as collateral for a loan.

We're also working in states to pass laws that will protect people borrowing for home improvements. All too often, older homeowners with substantial equity in their homes but with limited income are the victims of predatory lenders who convince them to take out a loan with outrageously high interest rates and fees to make home repairs. Many retirees end up having their home equity stripped, and some may even lose their homes. We want to stop that.

For More Information

The Priorities Book is not a substitute for AARP's more comprehensive policy reference, "The Policy Book". For more information about fighting fraud and predatory lending, explore Chapter 12 of "The Policy Book". The individual chapters of "The Policy Book" are available for download in Adobe Acrobat PDF format. You will need the free Acrobat Reader to access these files.

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