Predatory mortgage service involves unethical and illegal practices by mortgage servicers, including changing interest rates and terms without notification. Borrowers in vulnerable positions are often targeted, and may not understand their rights. Consumers should work with licensed professionals and report any suspicious activity to legal aid attorneys or government regulators.
Predatory mortgage service is a practice whereby mortgage servicers use ethically questionable and sometimes illegal methods in dealing with their customers. People can be tricked into switching to a new mortgage servicer with an offer of a special deal or service, only to find that once they move, the company changes the interest rate or terms or engages in other activity that is detrimental to the borrowers. Individuals who have been victims of predatory mortgage services may be able to file legal claims if they can provide documentation of explicitly illegal actions.
In the financial sector as a whole, predatory lending of various kinds is primarily a concern for borrowers who are in a vulnerable position due to income, age, low credit or other circumstances. Many people who don’t have very good credit and are in need of loans are poorly educated and may not understand the terms of loans. They may also be unaware of their rights as borrowers, creating situations where lenders can engage in illegal practices without fear of reprisal because borrowers fail to report them.
In the case of predatory mortgage service, practices can begin when someone initially applies for a mortgage and is encouraged to forge or alter information in order to qualify for a larger loan. Individuals also may not be provided with legal information required when mortgages are originated, such as discussions of the cost of the mortgage over time, information about origination fees, or detailed descriptions of specific loan terms. Some predatory mortgage service practices involve encouraging people to take out interest-only loans or other high-risk loan products without letting them know about the associated risks, creating a situation where people default on their loans.
A predatory mortgage lender may abruptly change interest rates, withhold information about the sale and exchange of loans to other lenders, or change terms such as loan expiration dates without providing sufficient notification. Borrowers can end up with an extremely high interest rate, as such loans commonly do not have capped interest rates. In the case of loans with an adjustable interest rate, the borrower may end up with a stiff bill when the balloon payment is due or the interest rate is first adjusted.
Consumers are generally advised to work with licensed mortgage professionals when applying for loans to avoid predatory mortgage service schemes. Red flags in a mortgage transaction can include refusals to answer questions, pushing people to sign documents without reading, or promises that seem too good to be true. If people suspect that fraud or other illegal activity may have been involved in a mortgage transaction, they can contact a legal aid attorney for free assistance, and they can also file a report with government regulators asking for an investigation.
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