Predatory Lending Scams Contribute to Foreclosure Crisis

April 16th, 2012
Our housing crisis has a number of causes, including one that does not get much press: predatory lending. Predatory lending occurs when a mortgage lender uses unfair, deceptive or negligent lending practices, often specifically targeting minority, elderly and working-class populations.
Undocumented immigrants are particularly susceptible, as lenders know these communities are reluctant to go to the police or to a courtroom. People in this situation should know that there is no citizenship or immigration residency requirement to countersue or defend against foreclosure.
One common predatory lending scam works like this: a company will approach a homeowner and offer to repair or add an extension to a home. The same company or a referral company offers a high-rate sub-prime loan to finance the project. Typically, a large balloon payment is part of the loan which will require a refinance when it becomes due and owing. The company begins work on the house, but the costs start increasing, and more money is needed. Eventually, they drive up the cost so that the homeowner can no longer finish the project. Quite often, the payments are so large that people cannot keep up with them, or the balloon payment is accelerated due to a default on payments. The lending company then forecloses on the home.
Bankruptcy is one option to immediately stop the foreclosure process, but there are other laws that protect homeowners as part of the foreclosure defense. Stay posted this week to learn more about what can be done to fight back against these unlawful practices and to stop foreclosure.