Predatory Loans

This page will discuss some of the more predatory loans, including the Option Arm Loan. We will also discuss some of the potential causes of action that you may be able to file against the original lender of the loan (and broker if a broker was used), and and subsequent assignee of the loan who purchased the loan on the secondary market. The following information is general in nature, and should not be construed as legal advice or a substitute for legal advice. Although we have tried to be as accurate as possible, the following information may be inaccurate, missing some information, or outdated – as law can frequently change or become modified. If you have questions about your case, please contact a foreclosure defense lawyer in your area.

WHAT IS A PREDATORY LOAN?  WHILE DEFINITIONS MAY VARY, HERE ARE A FEW EXAMPLES IN OUR OPINION

(1) A LOAN UNDERWRITTEN TO RESULT IN PAYMENT SHOCK, DEFAULT, AND FORECLOSURE

(2) LOANS THAT LACK FULL, FAIR, CLEAR AND CONSPICUOUS DISCLOSURE OF ALL MATERIAL TERMS OF THE LOAN

(3) LOANS WITH EXCESSIVE FEES, AND HIDDEN FEES LIKE YIELD SPREAD PREMIUM (YSP)

(4) LOANS THAT TARGET THE ELDERLY AND MINORITIES (ESPECIALLY FOREIGN SPEAKING MINORITIES) WITH HARSH AND OPPRESSIVE TERMS

(5) LOANS THAT FAIL TO COMPLY WITH TRUTH IN LENDING LAW (TILA), HOEPA, AND RESPA

(6) LOANS THAT ARE ORIGINATED USING “BAIT AND SWITCH TACTICS” AFTER BORROWERS ARE ALREADY “LOCKED-IN” AT THE CLOSING TABLE

(7) LOANS THAT ARE THE PRODUCT OF FRAUD IN THE FACTUM WHEREBY A BORROWER IS LEAD TO BELIEVE THE LOAN IS ONE PRODUCT, WHEN IN FACT IT IS ANOTHER PRODUCT (EX. THE OPTION ARM LOAN)

(8) LOANS THAT ARE BASED UPON FRAUDULENT APPRAISALS

(9) LOANS THAT ARE ORIGINATED BY “STEERING” A BORROWER WITH GOOD CREDIT INTO A SUB-PRIME SLIME LOAN OR OPTION ARM LOAN THAT (IN BREACH OF A FIDUCIARY DUTY) ARE MUCH WORSE TERMS THAN THE BORROWER DESERVED.

(10) SUB PRIME SLIME OR OPTION ARM LOANS THAT ARE PREDATORY AND TOXIC AND YET HAVE A 2 OR 3 YEAR PREPAYMENT PENALTY DESIGNED TO KEEP THE BORROWER LOCKED INTO THE LOAN AND THE LENDER’S ENRICHMENT.

These are just a few general concepts in regard to predatory loans.  Of course, there are other facts and scenarios which can make a loan predatory in nature.  Where you have greed, you will find defective products designed to generate profits.  Keep in mind, many loans were sold on the secondary market which is a technique to try to “wash” the originating lender’s dirty hands by selling the loan to a “holder in due course” assignee.  If the liability gets too great for the originating lender (i.e. they face a plethora of lawsuit for their predatory loan practices, they often times, as we have seen, file for Bankruptcy and try to avoid liability for the mess they created.  See more information about attacking loan assignees in our “HOLDER IN DUE COURSE” Section.