There is no question that the housing market is undergoing a bit of stress. Housing prices are steadily going through the roof and the market appears to be unable to keep up with supply and demand issues. With these troubles playing on the minds of consumers there is now yet another problem to contend with. Predatory lending is a problem that is on the rise due to the reduced amount that brokers are getting for commission and the low volume of sales.
When Predatory Lending Happens
Predatory lending happens when lending agencies or salespeople act in a deceptive manner in order to convince people to borrow money under unfair or abusive loan terms, or when they violate the loan terms in a way that makes it hard for the buyers to borrow against the loan.
Some examples of predatory lending involve the broker telling people who wish to borrow money to lie on their application in order for it to pass through the approval process. Brokers also will give borrowers the highest interest rate loan in order to collect larger commissions or qualify for bonuses. The number of predatory lending practices that are going on now is doubled what it was this time last year.
Another type of predatory lending involves loan application fraud wherein the mortgage broker alters the information on the application to make sure that the loan is approved. People that are less educated or in a lower income brackets are more likely to be targeted by these aggressive predatory marketing techniques.
Still Good Guys Out There
Not all brokers use predatory lending methods. There are still many good brokers out there who are just trying to make a good living. But Australians have to be diligent to ensure that they are not duped by the unscrupulous brokers. Brokers in Australia make twice what their American and British counterparts do and they are not under any obligation to provide the borrower with the best advice to help you get a fair deal.
The best advice for anyone who needs to get a loan is to shop around, know your facts and get referrals. Now that you have been made aware of this problem it should be easier to combat it.
Sean Rasmussen
Property Options Australia
Property Options Blog © 2006 – 2008
great points on home financing. I Look forward to reading more here in the future.
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Thanks Melissa. Glad you like the post and I hope it helps you to weed out the predators when borrowing in the future.
Hi Sean,
I didn’t know that such predatory lending practices existed. You would think that these kinds of practices would be illegal. Where’s ‘A Current Affair’ when you need them. This is the kind of story they love.
This is another good reason to get your home loan from a bank. Or, maybe you need to use a mortgage broker that’s recommended to you by friends or family.