Minnesota Predatory Lending Practices

Guide to Predatory Mortgage Lending

The mortgage industry is a multibillion-dollar industry. Homeowners and real estate investors across Minnesota and the country are losing their homes and investments because of some mortgage brokers, lenders, appraisers, and contractors push the boundaries of what is and what is not acceptable from both ethical and legal standpoints. While certain practices are ethically questionable, the courts are only concerned with those practices are illegal. A lawyer can help you to resolve problems with fraud or abuse in lending and protect you from predatory lenders.

Abusive lending practices can enter the mortgage equation at three points:

1. Loan origination: The process by which a mortgage lender creates a mortgage secured by some amount of the mortgagor's real property.
2. Loan servicing: The process by which a mortgage bank or sub-servicing firm collects the timely payment of interest and principal from borrowers.
3. Loan collection: The process by which a creditor recovers the balance due on a loan, which can include foreclosure and collection agencies.

Common cases of abusive practices include the following:

Fraud and abuse: Fraud can include anything from encouraging borrowers to lie about income and assets to using false appraisals. Common cases include brokers lying on applications to secure larger loan amounts than the borrowers would other be able to obtain on their own. Borrowers often don’t even know about the deceit; others are convinced by their agents that gaming the system is all part of the process.

Loan flipping: The lender or broker entices the borrower to accumulate further cash by refinancing the mortgage multiple times. The scheme increases the borrower’s debt considerably as fees are assessed for each loan transaction. The borrower might be locked into a higher interest rate than was in the terms of original loan. Larger loans mean larger monthly payments, which increases the risk of defaults and foreclosures.

Excessive fees: The lender attaches fees that exceed any amounts that are economically reasonable. The indefensible fees can be included in loan terms, including prepayment penalties, single-premium insurance, and balloon payments.

Asset-based lending: The lender determines loan eligibility based on the borrower’s assets. The problem lies in the practice of the lender taking the borrowers assets as collateral for a loan that the borrower cannot reasonably repay based on income.

Unscrupulous lenders and brokers will tend to target the elderly and people with low incomes. Typical victims have considerable equity in their homes and properties or have need for extensive repair to their homes. Predatory lending can spike in areas devastated by natural disasters, such as hurricanes, tornadoes, and earthquakes, when large numbers of people are displaced from their homes and are in desperate need of money.

If you think that you have been a victim of abusive or predatory lending practices, then e-mail or call attorney Patrick Oden at 651.210.9409 to discuss your options. Many cases can be taken on a contingency fee arrangement, which means that you will not pay attorneys fees unless you recover on your claim.