MBA and its members actively fight against predatory lending and work to reduce mortgage fraud. Lending practices that strip equity away from homeowners or place them in financial hardship are considered abusive and predatory. Lying on a mortgage application or other mortgage documents to gain property or profit is fraud against the mortgage lender. Avoid becoming a victim by learning how to identify the types of abusive lending practices, scams or other questionable business practices that predatory lenders and perpetrators of mortgage fraud use.
The questions below provide a means for you to determine whether someone could be misleading you about a loan and its costs to you. Questions 1 and 2 relate to mortgage fraud, while questions 3-10 are associated with predatory lending. Answering "yes" to any of the questions does not mean you are or have been a victim of fraud or predatory lending.
However, if you do answer "yes" to some of the questions, we recommend you contact the appropriate agency or agencies (see Have a Complaint?) to guide you. In addition, local law schools often have helpful clinics and may be able to provide legal assistance if needed.
MBA also has developed a Borrower's Bill of Rights that is designed to help borrowers understand how they should expect to be treated in the mortgage lending process. Click the link to the right to read this guide. You may want to print it out for reference.
1. Were you encouraged to include false information on your loan application?
2. Were you asked to leave signature lines or any other important line-item of any form blank? Did the lender or broker alter any information you entered on your loan application?
3. Check your loan file. Are any of the following disclosures missing?
4. Have you refinanced your loan several times and in each instance either your monthly payment and/or the total amount you owe on your home increased?
5. Do your documents reveal that your interest rate calculation will change to require you to pay "daily interest" in instances when your payments are late? Are there any pre-payment penalties if you want to pay off or refinance your loan (see article at www.freddiemac.com/singlefamily/pdf/ppm.pdf)?
6. Is your loan amount higher than the value of the home?
7. Did you incur any unexpected costs at settlement that were not explained to you prior to the settlement?
8. After settlement, were you surprised to find that the monthly payments on your mortgage loan were higher than you anticipated based on the initial disclosures?
9. If you have a balloon loan (one in which after a series of low payments the entire loan balance is due in a large lump sum), will you need to obtain another loan to finance that final lump-sum amount?
10. Were you required to buy credit insurance, insurance that will repay the debt if you die or become disabled? (Note: Credit insurance is optional and will not affect your loan decision if you decline to buy it. It can, however, add considerable cost to the loan transaction. You should decide carefully whether you are going to purchase credit insurance. See article at www.bankrate.com/brm/news/mtg/20010726a.asp).
These are the most important federal laws that protect your rights during the closing process:
RESPA requires that consumers receive disclosures at various times in the mortgage processing transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and it is enforced by HUD.
The Consumer Credit Protection Act of 1968 launched Truth in Lending disclosures. For the first time creditors had to state the cost of borrowing in a common language so that you—the consumer—could figure out what the charges are, compare costs, and shop for the best credit deal.
Other laws in your state may be in force to protect you from abusive lending practices such as excessive high fees and high rates, given your credit profile. High fees include charges for items such as pre-payment penalties and credit life insurance.