Texas Law Alert: Summer 2007

HOME LOANS AND PREDATORY LENDERS

We shop around for the best deals on the food we eat, the clothes we wear, and the cars we drive. So why do many people not shop around for the best deal on the largest expense they will ever incur their mortgage? The answer is that many people are taken in by the high-pressure tactics of predatory lenders.

Who are predatory lenders? They are lenders more concerned about making a buck than finding the right mortgage for you. Their lack of concern for the welfare of borrowers can cause all kinds of harm:

* They convince people to buy more home than they can afford through the use of pressure tactics and "teaser" rates;

* They sell properties for more than they are worth by using false appraisals; and

* They charge exorbitant rates for services that they do not provide or that are not necessary.

Because they target the very old, the very young, and those with less-than-perfect credit, predatory lenders can often convince people that they should not bother to shop around, and they lie to people about the process and about the loans they will receive. Often, the borrower discovers that he has paid too much for what he got or that he cannot afford the loan that was made, and he loses the house through foreclosure.

So what can you do to protect yourself? Much of it is common sense. Shop around for a loan, just as you would shop around for anything else. Ask for recommendations from professionals who do not work for the lender, such as your real estate agent. Remember, once the loan is made, it is your responsibility to pay it back in full, and anyone who tells you otherwise is not telling you the truth. Understand everything that you are asked to sign if you need to, take a document home and look at it first. And remember: If it sounds too good to be true, it probably is.