Predatory Lending: Predatory lending is any lending practice that imposes unfair or abusive loan terms on a borrower. It is also any practice that convinces a borrower to accept unfair terms through deceptive, coercive, exploitative or unscrupulous actions for a loan that a borrower doesn’t need, doesn’t want or can’t afford (debt.org).
Lending companies would give out loans without going into detail about your financial income and history. You want to buy a house for $300K no problem here you go! If you want to live the American dream and own a home, enjoy this housing bubble and make tens of thousands of dollars come on board but with one condition, high interest rate and some hidden fees. Don’t worry the increase in your home’s value will all be worth it, your $300K home will be worth $375K in no time. When the value of you home goes up you can refinance your loan to a lower monthly payment and everyone wins.
Everyone expected the housing market to continue rising and with Adjustable Rate Mortgages (ARM) people thought they would be able to refinance their home for a lower interest rate. What happens next is home prices leveled out and then took a turn downhill and then ARM loans more than doubled. If your initial ARM loan was $1,500 per month, it sky rocketed to almost $3,000 per month forcing everyone to foreclose on their home. Mortgage companies I work for have a high level of integrity and moral compass and ensure this does not happen again.
