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Predatory Lending: What You Need to Know

 

What is a predatory lender? 

Predatory lenders profit from unfair and unlawful loans.  Often, the loan broker initiates these transactions with promises of low interest rates, lower payments, and extra cash in the borrower’s pocket.  Using high pressure and misleading sales tactics, these predators often take advantage of people of color, the elderly, people with disabilities, and lower income families. 

How can I tell if I have been approached by a predatory lender? 

If a lender contacts you first, be cautious.  Lenders who discourage you from seeking other offers and hurry you through the process are often hiding unlawful practices.  Offers that seem too good to be true often are.  Watch out for “bait and switch” tactics.  If a broker starts out offering a low interest rate, and a chance to pay off debt plus put cash in your pocket, then comes back with apologies and a new offer at a higher rate, less cash and other changes, consider another source for your loan.

Who do predatory lenders target? 

Senior citizens, people of color, lower income families, people with disabilities, and those living in neighborhoods where these groups are prominent are prime targets.  If you live on a fixed income, have an imperfect credit history, and are unaware of your rights, you may be vulnerable.

What protections do I have from predatory lenders? 

Federal and Massachusetts fair lending and discrimination laws protect you.  Unfortunately, some lenders disobey the law.  If your broker avoids answering a question or changes the subject after you have asked a question, insist that he or she shows you the answer in your contract.  Read your contract thoroughly.  If any aspect of the contract is unclear or difficult to understand, get help from someone you know well and trust.  You are in a better position to get legal advice prior to signing a contract, rather than after the fact.

Watch out for:

Loans with balloon payments: A large payment due at the end of the contract.

Sub-prime loans: Loans aimed at people with credit problems, often with high variable interest rates. 

Bait and switch loans: Loans with terms that are different from those you were first offered.

Loans for more then your property’s value: Loans based on an inflated value on your property.

High pressure and unsolicited offers: Brokers that pressure you to close quickly, imply that they are doing you a favor, and approach you first.

Last minute changes: Terms that are unexpectedly changed at the time of the closing.

 

If you think you may have been the target of a predatory lender, contact:

Massachusetts Commission Against Discrimination
Boston Office: 1 Ashburton Place, Room 601, Boston, MA 02108  
Phone: 617-994-6000
Springfield Office: 436 Dwight Street, Room 220, Springfield, MA 01103  
Phone: 413-739-2145
Worcester Office: Worcester City Hall, 455 Main Street, Rm 100, Worcester, MA 01608 Phone: 508-799-8010


http://www.hud.gov/local/ma/homeownership/predatorylending.cfm
http://www.hud.gov/offices/hsg/sfh/pred/predlend.cfm
http://www.responsiblelending.org/