6 Clues a Lender is a Predator

April 1, 2008

Help your new or refinancing clients protect themselves by making them aware of activities that might indicate a predatory lending practice. Here are some tips from the NAR brochure “Are You Having Trouble Paying Your Mortgage?”

  • Excessive service fees. Lender fees of 1 percent are common on many mortgages — significantly higher percentages may be a red flag.
  • Teaser rates and balloon payments. Borrowers must understand what their payments will be when the rate is raised.
  • Delayed closing. Unscrupulous lenders may delay a closing so that a more favorable loan rates expires.
  • Overinflated appraisals. Higher values allow for higher fees to the lender and added cost to the borrower.
  • Prepayment penalties and other barriers to refinancing. Penalties for prepayment try to make it too costly for borrowers to get another loan at a more favorable rate.
  • Unexpected settlement costs that make the fees charged at closing significantly higher than those disclosed earlier.