Predatory Lending Practices for Subprime Mortgages

When shopping for subprime mortgages, there is a chance that you will be subjected to predatory lending practices. In order to avoid these practices, you will need to understand what they are and how they work. Here are a few common predatory lending practices that subprime lenders use.

Selling the Payment

Many subprime lenders tend to put an emphasis on the monthly payment instead of other areas of mortgage. They might be hiding some terms of the mortgage that are less than favorable elsewhere. However, they are only putting an emphasis on giving you an affordable payment regardless of where they are hurting you in other areas.

Non-Disclosure

Along the same lines, many lenders will not disclose all of the terms of the loan. Instead, they only show you the positive aspects of the mortgage. This can lead to terrible decisions on the part of the borrower because they are uninformed.

Interest-Only Loans

Another common tactic that is used by predatory lenders is to offer interest-only loans. These interest-only loans allow borrowers to only pay the interest as part of their monthly payment. When this happens, they are not addressing any of the principal on the loan. Then, they are surprised whenever they have a large balloon balance for the entire amount of the mortgage.

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