PREDATORY LENDING CHECKLIST

Warning Signs of a Predatory Mortgage Loan

• The Marketing of Mortgage Loans

Ø Aggressive solicitations of targeted neighborhoods through fax, e-mails, flyers

Ø Door-to-door solicitation of home improvement or financing arranged by contractor or mobile home dealer

Ø Racial and ethnic steering to high rate lenders by real estate brokers

Ø Large fees or kickbacks promised to the mortgage broker

• The Sale of Mortgage Loans

Ø Purposely structuring loans with payments the borrower cannot afford

Ø Falsifying loan applications (particularly income level)

Ø Making loans to mentally incapacitated homeowners

Ø Forged signatures (i.e, required disclosures)

Ø Adding insincere co-signers

Ø Shifting unsecured debt into mortgages

Ø Loans in excess of 100% loan-to-value

Ø Foreclosure rescue scams paying off low-rate mortgages

Ø Multiple good faith estimates of closing costs

Ø Changing the loan terms at closing

• The Loan

Ø High interest rate

Ø High fees and closing costs

Ø Balloon payments

Ø Negative amortization

Ø High appraisal costs

Ø Inflated appraisal

Ø Padded recording fees

Ø Back-dating of documents

Ø Charging for duplicative services

Ø Requiring credit insurance

Ø Mandatory arbitration clauses

Ø Making an unaffordable loan based on the value of the property

Ø Falsely identifying the loan as a line of credit or a business loan

• The Closing

Ø Rushed loan closing

Ø Terms at closing different what the borrowers thought they would get

Ø Back-dating of documents or presentation of blank documents, especially the Notice of Right to Cancel

Ø Failing to give your client copies of the documents at the closing

• After the Closing        

Ø Failure to pay off debts as indicated in loan papers

Ø Flipping (repeated financing, often after high-pressure sales)

Ø Excessive late fees (including daily interest) and other servicing charges

Ø Incomplete or inadequate home improvement work

Ø Shoddy installation of the manufactured home