HOW TO SPOT A PREDATORY LENDER

According to the Center for Responsible Lending, predatory lenders "promise' loans that sound too good to be true." The Center has identified "Seven Signs of Predatory Lending" and they are as follows:

• Excessive Fees - Fees below one percent of the loan are typical on competitive loans. Fees totaling more than five percent of the loan are typical of predatory loans.
• Abusive Prepayment Penalties - These are fees imposed for paying off the loan early. An abusive prepayment penalty is one that costs more than six months interest or is effective more than three years.
• Kickbacks to Brokers - A "Yield Spread Premium" or YSP is a cash bonus that a lender gives a broker for placing borrowers in a loan with a higher than normal interest rate. The higher the interest rate, the higher the kickback to the broker at your expense.
• Loan Flipping - Refinancing a loan to generate fee income without providing any net tangible benefit to the borrower constitutes flipping.
• Unnecessary Products - Lenders should not sell unnecessary insurance or other products along with the loan.
• Mandatory Arbitration - Borrowers are not allowed to seek legal remedies in court if their home is threatened by loans with illegal or abusive terms.
• Steering & Targeting - "Steering" borrowers into a "subprime" mortgage when they could qualify for a mainstream loan.