Predatory Lending in the Housing Industry

Predatory lending has caused many conflicts in the American society. Victims who fall for predatory lending are

A second mortgage loan officer, Sarah Harris, agreed to a $450,000 mortgage for a 20-year period at 8% interest rate after appraisal based on an income approach using 10.9% capitalization rate. Although not certain of her judgment, she considered Alexander’s projected figures realistic, but required him to personally sign the note as additional protection to the bank against loss.

The duty of good faith and good dealing is implied in every contract. In recent years the mortgage industry has been seen as a prime example of how consumers and banks need to better understand and adhere to duty of good faith and good dealings. Consumers had the responsibility of

The regulation that I have chosen for this paper is amendment in the Regulation X i.e. “Real Estate Settlement Procedures Act” and Regulation Z which is for “Truth in Lending”, for establishing the new disclosure requirements and forms in Regulation Z for the most closed-end consumer credit transactions secured by the real property. This regulation is controlled by the Bureau of Consumer Financial Protection. The role of the Consumer Financial Protection Bureau (CFPB) is to provide consumers information related to the terms of their agreements with financial companies during their application for a mortgage, choosing among credit cards, or using any number of other consumer financial products. The mortgage market is the single largest market for the consumer of financial products and the services in the United States, with approximately $10.4 trillion in loans outstanding. Since last decade, market went through an unprecedented cycle of the expansion and the contraction that was fuelled in the part by securitization of mortgages and the creation of increasingly sophisticated derivative products. This led to the collapse of financial system in 2008 and sparked the most severe recession in United States.

     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.

Anyone can be a predatory lender, just because one is dressed in a nice fashioned suit does not necessarily imply that they have a career or in this matter be willingly helpful people. A face can be as deceitful as the clothing of a person. In the article “Predatory

Lending and mortgage loans become predatory when the borrowers are led into a different transaction than what they were led to believe or come to expect. These predatory lending practices involve different people including mortgage brokers, lenders, real estate brokers, lawyers, and even (home improvement) contractors. Most of these transactions often victimize people who have small incomes but significantly large home equity

Brooklyn, NY – December 30, 2009 Foreclosures continue to rise drastically across the United States due to the recession, and have effected, and continue to affect thousands of families and individuals every day. One aspect we must take into consideration is that most people are not informed of what foreclosure means, or the process, even those who are homeowners. I believe that one step to preventing foreclosure is to educate first-time homebuyers. In addition, first-time homebuyer programs should not only assist potential buyers with financially preparing them to buy a home, but to keep the home once

Teaser ARM. This loan features an alluring initial period of very low interest, around 1% to 2%, which later resets to market rates. About 1.4 million borrowers will be jolted back to reality in the next two to three years as their introductory periods expire. Payments on a $200,000 loan at 2% are about $725 a month; at 7%, they're $1,340.

The first component of the solution is addressing the banks’ “toxic assets” that were created by the mortgage banks lending on overvalued property and lending to consumers that could not afford the payments. Underwriters should have prevented more of this; however that was not the case. In the future, banks and lenders will need to be more effective in the approval process that qualifies home buyers. The banks will have the option to participate in this program or not. They will also have the chance to pick and choose which properties will be included, if any.

As a topic for this research paper, I decided to analyze the ethics behind the recent mortgage crisis in the United States. Banks were approving people for loans very easily, to people they knew would not be able to pay them back. Thus, many people were buying homes, missing payments, getting foreclosed on, and ruining what credit they had. Throughout this paper I intend to show how the practices that the banks were using were unethical. I will show who stakeholders were, and analyze them through Utilitarian and Kantian standpoints.

Predatory lending is a real issue that really gets overlooked. The fact that those companies can misguide people by lying to the extent where they could lose thousands of dollars, and maybe even their homes is unnerving. A clear solution would have to be more legislation targeting companies who commute predatory lending. This would be difficult though as sometimes the misguided clients do not even know that they are being taken advantage of. As an example from above, a non-native speaker would still have to rely on the seller because of their lack of English skills. The most valuable skill to dodge these shady practices is to be vigilante of both the seller and contract for the loan. Hopefully, in the future being vigilant would not be necessary

Question 1: “Predatory lending is any lending practice that imposes unfair or abusive loan terms on a borrower” (Fay, n.d.). Predatory lenders can take the form of mortgage loans, payday loans, car loans, and any type of consumer debt. One example of predatory lending would be places that offer services such as payday loans. Pay day loans are short-term cash loans that the borrower has to pay back with their next paycheck. On average people borrow $350 for a two-week term. The borrower would have to pay a loan fee as well as an annual percentage rate between 390% and 550% making it almost impossible for the borrower to pay off their loan. This will end up keeping the borrower in a cycle of debt (Fay, n.d.).

It's a common norm that while seeking mortgage, numerous borrowers entail their services so as to get the most lucrative rates and loan terms.

Predatory lenders prey on consumers that are in a position so desperate that bargaining for a better deal becomes impossible. Lenders tend to set up in low income areas where education is low and desperation runs high. They can then use their position to impose astronomical origination fees and interest rates on the consumer. State and Federal governments have created laws to limit these practices; which focus on fees, interest and the method by which the loans were formed. Even though consumers are protected in the subprime loan market, the loans are still giving the lender more advantages than a prime market loan. The following will be focusing on the most notorious of predatory loans, the payday loan. First payday loans will be defined,