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The best predatory lending related news to come out of Washington, D.C. in years isn't the much needed federal law to corral the maverick lending practice, but a new brochure to help consumers circle the wagons.
Legislators on Capital Hill have been unable to marshal the votes necessary to wrangle lending outlaws, leaving it up to consumers to remain vigilant until the bad guys can be run out of town.
Nearly a dozen federal agencies from the Office of the Comptroller of the Currency to the Department of Justice comprise the Interagency Task Force on Fair Lending which recently released "Putting Your Home On The Line Is Risky Business".
Predatory lending is the persistent practice of a minority number of lenders or brokers who target vulnerable homeowners who are older, have lower incomes, credit problems and other conditions that make it difficult for them to pay the bloated price of mortgages they are issued.
Homeowners who need a financial bail out from credit abuse often turn to their equity when other financial options may be a better choice.
Among the brochure's approaches to avoiding being taken on equity loans, it initially suggests borrowers begin the quest for financial assistance outside a loan office.
The brochure suggests consumers:
Talk with creditors or with representatives of reputable credit or budget counseling organizations to work out a bill payment plan that reduces your bill payments to a more manageable level.
Seek help from local social service agencies, community or religious groups, and local or state housing agencies that may offer programs with help for energy bills, home repairs, or other emergency needs.
Local housing counseling agencies are another source of assistance.
Talk with someone you trust and who is knowledgeable about financial issues -- other than a lender or broker offering the loan -- before making any equity borrowing decisions.
The brochure suggests after exhausting non-borrowing options, do your homework before completing an application.
Talk with family, friends, co-workers and others you trust and who have recently completed a satisfactory mortgage closing. Obtain the names of several lenders or brokers. Avoid lenders who initiate contact.
Shop around not only for the best rate, but also for the best terms and loan costs. Pass up loans with prepayment penalties and heavy fees levied for missed or late payments.
After you've done your homework, begin negotiating with lenders for reduced rates, fees and other costs. Don't be afraid to make lenders compete for your business.
Once you've selected a lender, obtain a "Good Faith Estimate" of your costs within three days of completing the application. Ask for blank copies of all the forms you'll need to sign at closing. Read them over. If you don't understand something, ask for an explanation. A week or two before closing, contact the lender to determine if there have been changes to the Good Faith Estimate. By law, you can also study the settlement statement one day prior to closing. Do it.
Before signing on the dotted line, have a knowledgeable friend, relative, attorney or other person you trust review the Good Faith Estimate and other papers. Look for the terms you agreed to. Get all promises in writing, don't yield to pressure to sign quickly and don't sign incomplete forms.
After you sign, if you used your home as equity, you have three days to cancel the deal. Even after the three-day period, if you believe you were had, state and federal laws may protect you. Low cost legal services, consumer protection agencies and affordable housing agencies can provide assistance.
The brochure also lists participating federal agencies prepared to help you, should problems arise before and after you sign on the dotted line.
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