What is predatory lending?

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13th May 2011 by Dr. Matahma Baldovino Araneta - Angola Specific

Predatory lending is like an Indian house to house creditor, just like what you can find in the Philippines. They usually ride motorcycles and offer credit to small scale business such as sari-sari store, sago gulaman vendor, tailoring shop, etc. They charge interest of 20% per week- thus the term 5-6 which they are known for. In Sampaloc, there is a thriving Indian community (Prudencio and Honradez St). They cook curry for breakfast, lunch and dinner. Their neighbors complained to the baranggay because of the foul odor their food emits (not to mention the body when sweating). After the 1986 revolution, most of these Indians went underground and formed their own group known as AmBaHo Nha Min. But during the 1990 Senate investigation, it was discovered that these Indian are involved in sexual orgy- which they videotaped and distributed for sale in the United States.

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27th Nov 2009 by Ellen Silverman

Predatory lending typically occurs on loans backed by some kind of collateral, such as a car or house, so that if the borrower defaults on the loan, the lender can repossess or foreclose and profit by selling the repossessed or foreclosed property. Lenders may be accused of tricking a borrower into believing that an interest rate is lower than it actually is, or that the borrower's ability to pay is greater than it actually is. The lender may profit from repossession or foreclosure upon the collateral.

People are losing their homes and their investments because of predatory lenders, appraisers, mortgage brokers and home improvement contractors who:

Sell properties for much more than they are worth using false appraisals.
Encourage borrowers to lie about their income, expenses, or cash available for down payments in order to get a loan.
Knowingly lend more money than a borrower can afford to repay.
Charge high interest rates to borrowers based on their race or national origin and not on their credit history.
Charge fees for unnecessary or nonexistent products and services.
Pressure borrowers to accept higher-risk loans such as balloon loans, interest only payments, and steep pre-payment penalties.
Target vulnerable borrowers to cash-out refinances offers when they know borrowers are in need of cash due to medical, unemployment or debt problems.
"Strip" homeowners' equity from their homes by convincing them to refinance repeatedly when there is no benefit to the borrower.
Use high pressure sales tactics to sell home improvements and then finance them at high interest rates.

Though there are laws against many of the specific practices commonly identified as predatory, various federal agencies use the term as a general term for many specific illegal activities in the loan industry.

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4th Nov 2009 by Daniel Cross, ChFC

Predatory lending comes in many various forms. Most infamously was the recent "sub-prime" mortgage loans that were responsible for the housing collapse. These were loans with confusing terms that were packaged and sold to people that didn't understand exactly what they were buying. Examples of the type of loans sold were interest only for a fixed amount of time that would then reset to a much higher rate if it was not refinanced, or adjustable rate mortgages that worked in similar fashion.
The argument could be made that check-cashing or pay day advance loans are another example of predatory lending as these loans come with extraordinarily high interest rates and fees for not paying within a certain time frame, usually one week.

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3rd Nov 2009 In Finance 3 Answers | 2340 Views

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