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Fair Lending Campaign Borrowing opportunities are bountiful in America. Credit, when used properly, can help us acquire expensive items like cars and homes sooner than if we had to actually save all the money required to purchase these items. A home loan is typically the largest debt most people ever encumber. Down-payment requirements, interest rates, fees, costs, terms, mortgage insurance, qualifying ratios and APR are some of the key comparison points that borrowers can familiarize themselves with when shopping for a home loan. Consumers be aware that lending comes in three general categories. Prime loans earn reasonable returns for lenders via market interest rates and customary loan fees charged to borrowers with good credit performance and reliable income sources. Prime loans are earned by borrowers that present little default risk in timely repayment of their debt to the lender. In alternative credit or sub-prime lending, logic dictates that the riskier the borrower the more lucrative the loan to the lender or broker. Sub-prime loans are designed for sophisticated borrowers with credit blemishes or other issues that may increase timely repayment risk to the lender. Because credit for the purchase of a home is something everyone should have access to, sub-prime lending prospers in Arizona and America. Most institutional lenders offer both prime and sub-prime loan products. Predatory: inclined or intended to injure or exploit others for personal gain or profit A third category of lending is thriving throughout Arizona. Housing advocates, governments, lenders and consumers continue to debate on a unanimous definition of predatory lending, however one thing is certain: when borrowing for the purchase of a home, predatory loans are designed to make as much money off an unsuspecting borrower as possible before they eventually lose their home. Predatory lenders share some common practices: Higher than necessary interest rates, points and fees; volatile adjustable interest rates; hidden prepayment penalties, call features and balloon payments; promises of future refinancing opportunities; payment caps; no impounding of property taxes; pressure sales of overpriced or unnecessary other services and insurances; house payments based solely on the borrowers income with no regard for other current or future debt. Inevitably, borrowers who have been victims of predatory lenders will lose the home they posed as collateral for the loan when they are unable to meet the lenders repayment requirements. The negative affect of foreclosure ripples through the entire community. If you believe you or someone you know may have been a victim of predatory lending, nonprofit housing counselors can help demystify the paperwork and offer guidance. Contact Sara Markey at Arizona ACORN 602-254-5299 or email her at azacorn@acorn.org or visit www.acornhousing.org to learn more about predatory lending practices. Rehab/Emergency Home Repair | Rental Housing Upcoming Events | About Us | Contact Us | Disclaimer | Home | Arizona Housing Counseling Collaborative www.arizonahcc.org © 2009 Arizona Housing Counseling Collaborative. All Rights Reserved. Site by Hemispheres Internet, Inc. |
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