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What is predatory lending?

Buying a home that you can call your own is an exciting time for a New Jersey resident. Unfortunately, there are companies and individuals who use this time to prey upon borrowers by offering loans that are unfair and can be financially detrimental to you down the road while padding their own pockets. This should be a rewarding experience and you should have peace of mind knowing that your loan will not eventually lead to losing your home through a foreclosure or financial ruin. Be aware that predatory lenders can be quite smooth in their presentations, so do not be afraid or embarrassed to exercise due diligence when you are going through the loan process.

The New Jersey Housing and Mortgage Finance Agency offers a clearly outlined guide for policies and procedures that a lender in New Jersey must abide by. This includes a list of qualifications that must be met to provide loans, the types of information that must be disclosed to you as a borrower, examples of unacceptable predatory practices and more.

There are a few red flags to keep in mind that may signal that a lender is trying to take advantage. Be wary of vague answers. A lender who is on the up and up should disclose all terms, fees and rates that are associated with your particular loan. Balloon payments may work at times but be sure your loan will not necessitate a huge payment at the end that can wipe you out. Shop around for comparisons to make sure you do not fall victim to price-fixing schemes, excessive fees, overly high interest rates or inflated appraisal scams. Be suspicious of offers to rescue you from potential foreclosure or financial strain that may include equity stripping or skimming. Predatory lenders can make their services sound like the answer to all your problems, but they can often lead you instead to bankruptcy or foreclosure.

This article is to educate only and should not be substituted for legal counsel.

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