Fighting predatory lending...

In these times of foreclosures and economic distress it cannot be stressed enough that where the lambs scatter the wolf is ready to nab the slowest, weakest or most unaware of danger...in the world of real estate that wolf is the predatory lendor. Very aptly named too - I found this article written way back when on CNN and thought it worth to re-post it here...

5 Tips:
Protect yourself from predatory loan practices. September 27, 2004: 3:23 PM EDT By Gerri Willis, CNN/Money contributing columnist

NEW YORK (CNN/Money) - Predatory lending can take many forms -- from pushing unjustifiably expensive loans on consumers to charging excessive fees for lending services.

Historically, predatory lenders have targeted less affluent neighborhoods as well as the elderly and minorities, the people least able to defend themselves.
How can you protect yourself? Here are today's 5 Tips.

1. Avoid high-pressure salespeople.

Let's say you're on the cusp of qualifying for the mortgage you need to get into the home you want. It's just slightly beyond your reach. A crooked mortgage broker may encourage you to lie about your finances in order to qualify for a loan they may not otherwise be able to get.

"Run for the hills if anyone asks you to inflate your income or deflate your debt," says Brian Sullivan, a HUD spokesman.

These characters may say, "Hey listen, let's not talk about this other debt you've got or -- let's bump your income up by another $5,000."
Sullivan warns this is a recipe for disaster. If you sign on to a mortgage you can't afford and fall behind on your payments, you risk losing your house, your down payment and your good credit.

Also, don't fall prey to the pressure cooker. If a broker/lender tells you they are your only chance of getting a loan, walk away. And don't be talked out of taking time to think over the terms of your loan.

2. Know your home's value.

According to HUD, some predatory lenders lure vulnerable borrowers with cash-out refinances offers when they know borrowers are in need of cash.

These refinances are most often promoted for debt consolidation or to provide money for personal needs. This disastrous situation can play out a number of ways. Once you've taken the bait, the predator may tell you your home has been appraised for more than it's really worth. Why? So you'll take out a bigger loan.

In other cases, homeowners are sold refinance loans based on inflated appraisal values carrying high fees and harmful terms-like pre-payment penalties. To protect yourself, get an independent appraisal if you can afford it. Appraisals can cost anywhere from $300 to $600.

You should also check prices for comparable homes in the area. That way, you'll have an idea what real home values are where you live.

Log on to www.realtor.com or local real estate Web sites to get a sense of what homes are going for. Another resource, www.Domania.com, will help you find actual purchase prices of homes in your neighborhood (its database does not include Texas and a handful of other states.)

3. Don't get steered.

Some unsavory individuals often engage in a practice known as "steering."
According to the National Training and Information Center, an advocacy group, this is when unsuspecting borrowers with credit good enough to qualify for prime-rate loans (8% to 9%) are steered toward loans with sub-prime rates (9% to 20%).

If you suspect you might qualify for loan rates lower than ones you're being charged, there are ways you can comparison shop. Web sites like Bankrate.com can give you rates by state for home loans, refi's and even auto loans. Another one to try is www.hsh.com.
It's always a good idea to know just how creditworthy you are. Credit scores in the range of 620 to 650 indicate basically good credit. If you have a credit score of 680 or higher you will likely qualify for the lender's best rate.

Check out your credit history at the three major credit bureaus: Experian, Equifax and TransUnion. The cost to get your report can range from $9.00 to nearly $30 but qualifying individuals can get one a year for free. One reason everybody should do a preemptive credit-check is that sometimes there are mistakes on your record that could cost you. So check before you apply for any loans.

For more information on tactics used by predatory lenders use, check out www.ntic-us.org. Another helpful resource is the Association of Community Organizations for Reform Now, the nation's largest community organization of low and moderate-income families. Their Web site is www.acorn.org.

4. Fight junk fees.

According to Laurie Maggiano at HUD, lenders can only charge fees for the services they provide. "The bottom-line [is] if you see charges you don't understand, find out what they're for and if they're necessary. If you see a charge for a credit report that totals $200, ask about it! The going rate for a credit report is only about $15."

Be on the lookout for things like "payment processing fees," "document prep fees" or "administrative fees" -- these could be "junk fees" in disguise. Ask about them. If you're not satisfied with the answers you get, tell your lender you want a reduction -- or better yet, try to get them eliminated all together.
According to bankrate.com, lenders are often willing to heed these requests in order to keep a deal together. Before you sign on for any loan, ask for a Good Faith Estimate, a written estimate of your settlement costs. Lenders are required to give you one within three days of application. So shop around.

5. Get free help.

If you're an inexperienced homebuyer, there's help out there.
On the HUD Web site, you'll find online brochures and information meant specifically for beginners and first-time homebuyers unfamiliar with the process. Log on to www.HUD.gov to find an agency location near you, or call 1-800-569-4287.

If you're having trouble understanding the jargon in your real estate paperwork, take your documents to a HUD-approved housing counseling agency. In many cases they will review your documents or refer you to an attorney who will help you for free or at a reduced cost.

Gerri Willis is a personal finance editor for CNN Business News. Willis also hosts CNNfn's Open House, weekdays from Noon to 12:30 p.m. (ET).