Predatory Lending Facts
9 billion dollars is lost each year to Predatory Lending and minority families, the senior community and single moms are the #1 victims.
In 2005 national banks charged minority families an average of 2-3% more on their home loans than white consumers. On a 300,000 loan 2-3% higher means a payment of $ 500-$700 more each month. That is a loss of over $6,000 in equity each year.
Affluent African Americans have 4 times the chance of being victims of Predatory Lending than low-income white families.
The Hispanic community has 2 times the chance of being victims of Predatory Lending than low-income white families
In 1920 the African American Community owned 15.5 million acres of land. Today they only own 1.1. million acres of land.
"U.S. borrowers lose $9.1 Billion Annually
To Predatory Lending Practices"
Source |
Predatory Practice |
Annual Cost
(billions) |
Number of Families
Affected Annually |
Equity Stripping |
Financed Credit Insurance |
$2.1 |
500,000 |
|
Exorbitant Up-Front Fees |
$1.8 |
750,000 |
|
Sub prime Prepayment Penalties |
$2.3 |
850,000 |
Rate-Risk Disparities |
Excess Interest Charged |
$2.9 |
600,000 |
Excessive Foreclosures |
Lack Concern for Ability to Pay |
? |
|
|
TOTAL |
$9.1 |
|
Types of Predatory Lending
Flipping or Churning
Flipping or churning occurs when a lender or broker continually refinances a consumer’s home loan without providing a benefit to the consumer for the new loan. Each time the loan is done, more and more fees are folded into the loan which strips equity from the consumer’s property. Seniors are the number one victims of this type of predatory lending practice. If you are refinancing your home, you need to know your benefit.
Exorbitant Fees
When you refinance or buy a home there are fees associated with the transaction. These fees should be disclosed to you on a good faith estimate. The fees cover items including but not limited to title insurance, escrow, taxes, insurance, processing and loan origination fees.
A fair broker will charge a loan origination fee and a loan processing fee along with third party fees such as escrow and title. Unfair brokers and lenders charge application fees, administration fees, and excess fees that are folded into a consumer’s loan.
Brokers and lenders should get paid for their services however some abuse fees. These fees are deceptively costless to many borrowers because when the borrower “pays” them from the equity of their home, they do not feel the pain of counting out thousands of dollars in cash. The borrower parts with the money later, when the loan is paid off and the equity value of their home is reduced by the amount of fees paid to get into the loan |
