Predatory Lending in the Housing Industry

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The Ethics of Predatory Lending in the Housing Industry

The real estate industry is thriving with approximately sixty-eight percent of all Americans being homeowners. With low interest rates, 1st time home buyer down payment assistance programs, and government funded educational opportunities (i.e. the Home Ownership Center of Greater Cincinnati), the real estate and mortgage lending industries will continue to flourish. However, there are some unethical lending practices that are threatening the housing industry as a whole. Those involved in the mortgage lending process have some duty to the borrower. They are expected to perform their specific duties in an ethical manner and have some form of direct or indirect contact with the
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credit life insurance being implied as necessary to obtain a loan).

• Failure to report good payment on a borrower 's credit report.

• Falsifying loan documents.

• Making loans to mentally incompetent parties.

• Mailing "live" loan checks to clients that do not request them.

Through the use of false promises and sneaky sales tactics, borrowers are convinced to sign a loan contract before they have had a chance to review the paperwork. If the borrower is allowed the chance to go over the fine details of the contract, a significant amount of the borrowers targeted by predatory lenders haven 't been updated enough to really understand what they are signing. In most cases, sub-prime borrowers do not hire attorneys to represent them. They either don 't have the cash flow to do so, or they are not made aware of the opportunity. An example of the predatory lending practice of high interest rate financing is as follows:
A $100,000 mortgage at 8% and zero points over a 30-year time period yields interest worth $164,155. Not all loans are available at 8% because not all borrowers have great credit. Now, let 's say that 8% is the base rate for loans today but rates as high as 12% and zero points will be allowed. This means that a $100,000 loan over 30years would have a projected interest cost of $270,300. Any loan with a higher projected yield—including interest, points, loan discount fees, origination fees, and
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