Housing Crisis Reveals Larger Problem

property fraud

The fraudulent act of predatory lending practices often leave homeowners in debt.

The housing crisis has unfortunately revealed yet another issue in the real estate market.  According to a post created for the McFarlin, LLP website, some lenders are taking advantage of the dire housing market to attempt schemes and tricks against their loan applicants.  The resulting scam is entitled predatory lending practices, and large banks and sub prime lenders typically engage in the fraud.  Essentially, this scam involves exploiting homeowners until they are buried in debt.

There are two separate types of predatory lending practices.  First, there are lenders who extend abusive loan terms.  This is when a lender offers high interest rates and fees, producing balloon payments, extreme penalties for late payments and large upfront fees.  Unfortunately, this means of predatory lending practices often leads to foreclosure proceedings; the lender may utilize foreclosure fraud to further abuse the already tricked homeowner.

The second means of engaging in predatory lending practices is entitled discriminatory targeted marketing.  Essentially, this requires the bank to use public information to locate vulnerable individuals—people they think may fall victim to schemes.  It should be noted that it is not illegal to market to a large audience; however, legality becomes an issue when banks use marketing to exploit groups of consumers.  In this method, targets are engaged in discussions, in which certain important facets of information about the loan are omitted, resulting in consumers that are tricked into a deal they cannot afford.

In both of these methods, victims fall behind on their payments, making it very difficult for the consumer to save their home or protect their credit. As a result, many fall to foreclosure, as opportunities to save the home are missed, due to a lack of knowledge in their legal rights.  Therefore, the post urges that any consumer that feels suspicious about their treatment at the hands of a lender contact a legal consultant, just to make sure the loan terms and deal are all legal and in the best interest of the borrower.