predatory lenders deception interest

Spotting Predatory Lenders: Deception, Interest, Debt Cycle

In part one of this two-part blog series, we went over some of the top signs that you might be dealing with a predatory mortgage lender. While we wish such entities did not exist, sadly there are some within the mortgage world who, rather than attempt to assist clients for mutual benefit, simply try to pull the wool over their eyes and take advantage of them in several ways.

At Primary Residential Mortgage in Houston, we’re here to ensure this doesn’t happen to you. We offer several quality loan programs, including programs like the FHA loan that are often ideal for first-time buyers – typically those at some of the greatest risk for mortgage scams, as predatory lenders often target inexperienced buyers first. What are some of the other indicators that a lender you’re researching is predatory, and how can you be sure to avoid these risks?

Deceptive Presentation

One of the top tactics predatory lenders will take involves trying to confuse you with some of the details – and because mortgages come with lots of details, you can understand why. Numbers are a top area where predatory lenders may attempt this sort of thing, especially within interest: A lender may try to make your interest number seem different than what it really is, sometimes by expressing a monthly number as yearly to throw you off.

Be sure you look very carefully at any and all data involved in a loan application. Ask for the Annual Percentage Rate (APR) when discussing interest rates – this is a full, complete expression of your yearly interest expectations. If a lender refuses to give this to you, you should not work with them.

Interest Rate Concerns

Speaking of APR, it’s vital to do the math on the interest rate you’re being given to confirm that your interest will not exceed your principal loan amount paid. Often with the assistance of a realtor or one of our loan officers, it’s easy to calculate whether you’ll be charged more for the loan than the amount you need to borrow – in which case you should not move forward.

Debt Cycle

Often connected with ridiculous interest rates is the realization that, if you move forward with this sort of predatory loan, you’ll be stuck in a hugely damaging debt cycle. Your interest will keep going up month after month because it’s too high for you to pay off on a robust monthly basis, trapping you into a cycle of interest fees and debt.

Bank Account Access

Finally, while it’s normal for lenders to offer direct withdrawal options to borrowers, any lender who requires your bank account or a backdated check should not be trusted. They may be looking to commit outright fraud and remove unapproved funds from your account, or could be looking to alter a check illegally.

For more on signs that often identify a predatory mortgage lender, or to learn about any of our home loan services, speak to the staff at Primary Residential Mortgage today.

*PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Opinions expressed are solely my own and do not express the views of my employer.