Predatory lending is a catch phrase
for unethical lending practices committed by a small number of financial
institutions or brokers. Many predatory lending practices are already
illegal under federal and state laws, and many financial institutions have
instituted comprehensive controls to protect consumers and support federal
efforts to stop potential abuse. The Federal Reserve views predatory lending
as a broad set of behaviors involving unfair, deceptive or fraudulent
practices such as:
Making unaffordable loans based on the assets of the borrowers, rather
than on the borrower's ability to repay an obligation.
Inducing a borrower to refinance a loan repeatedly to charge high points
and fees each time the loan is refinanced ("loan flipping").
Engaging in fraud or deception to conceal the true nature of the loan
obligation from an unsuspecting or unsophisticated borrower.
Predatory loans often contain
pre-paid insurance premiums, balloon payments, negative amortization,
unilateral loan call provisions, mandatory arbitrations clauses, or interest
rate increases triggered by a borrower's default. Predatory lenders also
engage in deceptive practices with regard to loan prepayment penalties or
often make loans in which the lenders suspect that the borrower has little
or no ability to repay.
The practices of Home123's lending
designed to treat consumers fairly and equitably. Each loan underwritten by
a credit union must demonstrate an identifiable benefit to the borrowers,
and all borrowers must have clear ability to repay the loan. Home123
lending partners do not:
Make loans considered "high cost" under federal, state and local
Engage in predatory marketing practices.
Equity stripping, loan flipping or loan packing.
In addition, Home123 lending partners
do not make loans with potentially abusive terms, such as:
Single premium credit insurance
Unilateral loan call provisions absent default
Mandatory arbitration clauses
Interest rate increases triggered by default