Q: How do I know if I’ve been a victim of predatory lending?
Paul:
Start by comparing the loan you got with the one you thought you were getting. Are the terms the same? That is, is your Annual Percentage Rate (“APR”) the same as the one you were quoted? Are your total monthly payments the same as you were told they would be? Is there a prepayment penalty, and if so, were you told about this prepayment penalty?
Nathan:
While it’s always a good idea to read and try to understand every page of every document before you sign, a set of loan documents is a daunting read for most borrowers. Thus, many borrowers rely on their broker or loan officer to thoroughly explain all the important parts of the documents and to make sure that the documents state exactly what terms were agreed. Unfortunately, your broker and loan officer make more money by getting you to pay higher closing costs, accept a higher interest rate, and by locking you into a loan by adding a prepayment penalty. These brokers and loan officers may not be upfront about these unfavorable terms when explaining them to you.
Q: Okay, I’ve read my loan documents, and I think I’ve been lied to and I am the victim of predatory lending. What can I do?
Nathan:
Call or visit a mortgage law attorney in your state with your questions. This attorney should be able to review your documents, confirm your suspicions, and tell you what you can do to either get out of your loan or get compensation for any damages you have suffered as a result of that bad loan.
Paul:
Some violations of the Truth in Lending Act are so easily spotted that it takes an experienced mortgage attorney just a few minutes to uncover them. Other violations are harder to find and require recalculations of the loan figures to discover. We are often able to meet with a potential client, reviews the loan documents, and discusses how the loan was done. We are usually able to determine whether there was a violation within 30 minutes, and then advise the borrower whether he or she has a case worth pursuing.
Q: What kinds of predatory lending cases are worth pursuing?
Paul:
If a potential client has refinanced his or her primary residence, that is, the home he or she lives in, then one of the first things we look at is the “notice of Right to Cancel” which is also called the Three Day Right of Rescission. A borrower usually has three days after signing loan documents to change his or her mind and cancel the loan. The borrower must be told of this right in writing. If the creditor fails to properly provide notice of this right to cancel, the right of rescission may be extended for up to three years.
Nathan:
When the right is extended for three years a borrower can rescind the loan at any time before three years, meaning that the loan is treated as if it never existed. Essentially, the borrower becomes entitled to all profits made by the creditor as a result of this loan. This means that the creditor must refund all interest paid, all closing fees, all broker fees, and even pay for the borrower’s attorney fees. As you can imagine, this amount can be quite significant.
Paul:
The extended right of rescission is a powerful tool to help borrowers who have been victims of predatory lending, and helping our clients exercise this right is often the first step in holding a creditor responsible for illegal behavior.
Q: How do I get more information?
Nathan:
If you’re in California, call our office. We will help you understand your rights, understand your loan, and determine whether you have been a victim.
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{ 10 comments… read them below or add one }
A-MEN. I totally agree. These so-called educated, power/hungry people running the financial side of our country are putting us, the middle class-working our ass off-people, into poverty. We are working to try and pay for a loan that we used to be able to afford and now can’t. We are the working class and I am sure we outnumber the financially secure people who don’t have the same problem as we all do. That is why we can’t get anything done. Because they look down on us, they are too good to help scum like us. I called wonderful countrywide home loans today to ask them to modify my ridiculous loan. I tried to talk to someone in loss mititgation but got hung up on twice. I tried to get to the right person, but got transferred to someone who has no jurisdiction to do anything. It ended up in her calmly telling me, “I was outta luck” and “we honestly want to help but our hands are tied by law”. What law? there is no law, they do whatever they want! It must be the law of trying to squeeze every last dime out of you. So basically I can’t refinance the stupid loan with anyone else because of my shot credit, because of this loan. And it is scheduled to go up every six months. In the meantime every credit card I have is maxed out and I am using it to pay the house payment. But now I have nothing left. If my loan was at a set amount every month where it started out 2 years ago, I’d be fine. But it has gone up over a thousand dollars since then. I could go on and on about my situation. The point is, I just am sick of getting the life sucked out of me by this house payment. The only option I have is to walk away. I told them that too, but they don’t care. All of these people in positions to do something won’t. It seems like they don’t even think twice about the people building this country, the ones literally breaking their backs and sweating like pigs to build all the very comfortable offices they work in and homes they live in. They seem to only be concerned with their wealth and well being. But they don’t realize that our country is ready to go down in flames and the lifestyles they enjoy will come to an end if nothing is done about this huge problem. We are teatering on the brink of really bad stuff happening to our economy. I am not any finiancial expert, but I see the changes in my own town and know things aren’t looking good. How hard would it be to work with the people who have been struggling to pay these outrageous monthly payments,on time, every month.Why can’t they take a bit of a cut, which I am sure won’t be too bad on them, and agree with those of us who have been current on our loans each month and work things out to help us stay in our homes and save the economy by doing a modification and we can all get back to trying to live our lives before the greediness got the best of us? This is a tradgedy and needs to be addressed by people who care and who can make these laws make the lenders do something!This is AMERICA!
You speak out of my heart. I am still current on my ARM but think that this is the last month. I have tried to go to my boss to ask for a raise which I did not get even I am his ass in the hole (“I would fire everybody just to keep you-blah”)but he gave me “good” advise: “Listen you do exactly as I say: You ask for a loan modification and say if you don’t get it you will walk out. If they really don’t lower and stabilize your rate then walk out and before thats reported to your credit you’ll buy another real estate and say its investment property. As soon as you have this other place with lower interest rate they can’t take it from you and you move in. And the foreclosure of your house with the ARM probably will not even be reported and if it will you tell’em that you give them 3000 Dollars if they remove the bad data from your credit report. They will do that because 3k is better than nothing. And buy the way just buy something close to my office “(my work is 70 miles from my house)” so you can work more” -underpaid- “overtime.”
I called also mortgage brokers which want 3-4 points and can give me an interest rate between 7-11%-but you see the 11 percent is a fixed rate!-A fixed rate I can’t pay and is nearly as high as the max on my ARM!
The other scenario is to pay my 5 year old medical collections from when I broke my neck without health insurance because my boss back then was to cheap to offer some. (I broke my neck on the way to work-by the way-fell asleep in the car because I was overworked)-But I would have to pay that in cash because the value of my house dropped so I can’t get cash-out which is 90% LTV. Another company says NO because my husband owes child support -which we are paying timely since 3 years.
Another company says my 590 credit score is too low even though my husband has a 660 credit score. My score is low because I have used money from credit cards to pay the mortgage on time. Denied because to high of a debt ratio. But the loan modification does not seem to take credit card debt into account-so I did not here the decision yet I am waiting they said they would call in a few days but nobody did call-but I can see they might say we make enough money or to little. But we can complain and complain but what can we do to change that? Where can I go which group to join-there must be a way-that is America!
Very good piece Moe,if you were excepting votes, you would have mine.
I also have a(broken)ARM,and I was wondering when and if the rates are lowered on 9-18,what range would I be looking at if by some chance I were to have my loan modified?
The only way I see keeping my loan/home is if the lender shows mercy and offers me a really a good rate,but I just don’t see these lenders bending over backwards to give us adequate assistance. Moe,what are your thoughts in regards to a best possible rate scenario or range, both
now and perhaps after the 18th?
I could tell you this much,some of these lenders are already talking about loan programs that might be available on the 18th. But unless my monthly mortgage /rate is affordable,it does me no good in the long run. Your,thoughts?
I’m glad you can relate to my post
Who is your boss? Seems like he somewhat know what to do in these situations. Even though it was a little extreme.
However the claims of the foreclosure not being reported are terrible advice. I have never seen a foreclosure not reported. Also, walking money to do a deed in lieu with your lender, is something I haven’t seen either. I have heard about it and I know it has happened in the past but not now. Imagine if everyone said, “We’re walking away and we’ll make it easy on you, if you just give us some cash to do so.” 2 million people would be at their enders door step waiting for checks. I just don’t see this approach happening at all.
Have you looked into the FHA Secure loan? Or just an FHA refinance? What state are you in?
Join my forum at http://www.LoanSafe.org and let your voice be heard! Good luck with your loan modification!
Moe
Thanks for the compliment!
A broken (ARM) . I like that analogy
A rate decrease will do nothing for most of the homeowners that are in these adjustable rate mortgages. Underwriting guidelinEs now are just too tough. A rate cut by the fed isn’t going to fix these broken ARM’s. We need mandated loan modifications to happen.
The loan programs of the past are gone and I don’t see any new, innovative refinance programs coming out anytime soon. So let’s hope congress makes lenders fix these toxic ARM’s fast!
Best of Luck!
Moe
You need to accept what you can afford AND what you cannot afford.
Borrowing on credit cards to pay a payment on a house that you may owe more on than it is worth is just foolish.
Foreclosure usually equals about 6 months of free rent. Until then, pay off the credit cards with that money and then find someplace to live that you can afford.
Living in a house isn’t a right, sorry.
If you don’t have any equity in a house, you don’t have anything anyway, except a very expensive rent payment.
I am sorry that you are in a tight situation, but it’s not right to blame anbody else for your debts.
Oh ya.. don’t pay off 5 year old medical collections, it will lower your credit score if you do.
OK, so what you are saying is that these loans that people got for the homes they purchased over the last 5 years are homes they can’t afford? Didn’t they have to “qualify” for these loans to buy the homes using underwriting guidelines that the lenders control to make sure that they can “afford” these mortgages that they would have to ultimately be responsible for?
Or were those fake loans that they had to qualify for using lending guidelines that are in place to make sure that money isn’t given to people who can’t “afford” to pay it back?
Most of the homeowners I speak with have paid their mortgage on time up until their loan adjusted. Yes, they new the risk of taking and adjustable mortgage, but they were told 99% of the time by licensed professionals, “Don’t worry in 2 years we’ll just refinance you out of that terrible loan into a new fixed mortgage. Please, sign here sir.” I bet if these same licensed professionals said, “You’ll never be able to get out of this toxic loan. The payment will go up 50% in two years and the bank will foreclose on you, ruining your credit for another 7 and kicking you, your wife, 3 kids, dog and goldfish on the street.”
How many people do you think would have taken the loan then? My guess is, is very few.
This is beyond that now. It’s affecting our entire economy and it’s just begun. If you want a full on recession, then I suggest Congress follow your path.
Oh, and it’s beyond debt and collections. More people are being ruined credit wise by this then anytime in history.
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Hi
I realize that you practice in California, but I just would like to ask a couple of questions. We live in Massachusetts. Unfortunately we where featured in Parade Magazine this past weekend. Our story is complicated and long. We recently sought the service of a mortgage auditor(not an attorney) to have our loans audited. I was wondering if it might be best to seek an attorney for this. She feels that we have the right to rescind our loans through Countrywide. The problem is that she was sanctioned by a judge in Boston. Also, would it be a real estate attorney and the chances that we might have in doing this or loan modification.
Sincerely,
Suzanne Dinmore