Question: What are predatory lending practices?
•Predatory lending is the act of approving loans for borrowers in which the lender has absolute knowledge of the fact that the borrower can not repay the debt.
•And there are other factors such as charging higher interest rates, higher loan fees, and fees that should not have been charged at all.
The legality of many of the loans have come into question because many of the loans were made with no regards to the credit scores or the financial worthiness of the borrowers.
And as usual, when the predators were let lose, loans were made that should not have been made and fraud took hold in many areas of the mortgage market. The lenders made large amounts of profit and many borrowers got stuck with loans that they can't get rid of.
But the lenders are not the only ones to blame. Many in places of government just sat back and watched as the real estate and mortgage markets went into a feeding frenzy. Properties doubled and tripled in price in many areas and a lot of money was being made and a lot of those who just sat back and watched, got rich.
And many borrowers have to take their fair share of the blame, too. Although some were unfairly targeted, many borrowers knew what they were doing when they got their loans. The thought of equity build-up and making money flipping properties was too hard to resist, so they jumped into the game. But as usual, those who got into the game late are the one's who are set to lose the most.
Although the phrase "Predatory Lending Practices" is a relatively new term used in today's news headlines and television talking points, predatory lending has been around as long as loans have been made.
All you have to do is think back as recently as the 1980's when the Lincoln Savings and Loan and the Silverado Savings and Loan scandals hit the airwaves. Like today, you can see the greed that took over when lots of money was being made.
Federal and state laws, set up to protect the general population, were swept to the side while money and greed took center stage. Rules and regulations governing the mortgage industry were thrown out the window, along with ethics and moral fortitude.
The difference today is that before the government stepped in to stop the abuse, many smaller lending institutions had jumped into the fray. Or maybe they were the one's who started the mess to begin with.
Anyway, the predators were given an open market, and they did what predators do, they took advantage of the poor, the elderly, the disabled, and many others who knew better, but wanted a piece of the action.
One of the big results of what has taken place in the housing market is the potential for a huge number of foreclosures and bankruptcies, although some experts believe that the outlook may not be as bad as it seems.
The federal government is trying to muster up a rescue plan but with the large deficit confronting the nation, it may be too little, too late. Only time will tell how deep the wounds are and how long they will take to heal.