How to Avoid Predatory Lending-SaveMoneyGuides.com
The Author
Hey, my name is admin, and I first published 'How to Avoid Predatory Lending-SaveMoneyGuides.com' on 6th August, 2008, within the Mortgage section.
From-SaveMoneyGuides.com-Predatory lending has been at the center of the whole housing problems of today. These lenders sell mortgages to people with the intention of making it impossible for them to continue the mortgage and bring the home under the ownership of that particular mortgage company. This can make for more money for them and destroy the credit score of the individual. This can also permanently destroy their chances of fulfilling their American dream.
Predatory lending is illegal, but it is also so common and so hard to detect that these people are getting away with financial murder. Predatory lending allows for people to obtain a mortgage for more money than they can afford for little or no down payment and a low starting rate. This makes it possible for just about anyone to be approved for the mortgage loans. While making it possible for people who would not normally be able to get a mortgage to get a mortgage is nice, what happens when these people cannot make their payments is not nice.
In predatory lending, the interest rates are very low to begin with. If a payment is made late or is missed, the interest rate goes through the roof though. What was once a nice 5% interest rate can become a 25% or higher interest rate. This then jumps the amount that one must pay per month which in turn leads to more late or missing payments and an eventual foreclosure. This is the predicted result and the desired reaction that the predatory lending institution wants. This lending facility then gets ownership of the house after the foreclosure and is able to put it up on the market for considerably more than the original mortgage was worth.
Other tactics of the predatory lending institutions is to offer land contracts or to offer rent to own homes with high interest rates or high fees. These homes will also be foreclosed or removed from the family that is trying to buy them because of missed payments or late payments. No method of purchase from the predatory lending facilities ever ends up in a positive manner since the entire practice is designed to take advantage of those without perfect credit and to either make more money off interest and fees or to bring the house to foreclosure and sell the house at a higher rate.
