Predatory Lending in the Housing Industry Essay

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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…show more content…
Mortgage Insurance Companies: Mortgage insurance companies are generally used if the borrowers down payment are less than twenty percent of the purchase price of the home. This is called PMI (Private Mortgage Insurance). The cost of private mortgage insurance is included in a buyer’s monthly payment.      What is happening is that there are some unethical lending practices that are threatening the housing industry as a whole. The concern involves the practices of some sub-prime lenders. These practices are considered to be “predatory” on consumers. Sub-prime lenders offer home loans (Equity Loans & 1st Time Home Purchase Loans) to moderate to lower income families. These clients are considered to be high credit risk borrowers, also know as B-C-D credit clients. Interest rates and other loan terms generally cost more than those paid by clients served by prime lenders with better credit records (A credit clients). Sub-prime borrowers end up paying more simply because the risk of loan repayment is fundamentally higher than that of a prime market borrower. These predatory practices include, but are not limited to: •     Extremely high interest rates, discount points, closing costs, and broker fees. •     Borrowers with inadequate income, receiving loans that they will default
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