Is Predatory Lending Real?

The majority of our society makes payments on credit cards and/or mortgages.  When you sat down to close on your home, did you really get the chance to read what you were signing, or were you hurried through the process as the papers were flying past you, and the fingers were pointing to where you sign your life away? Do you really know what you agreed to pay? 

You’re down to the wire, at closing, and excited about the fact that you’re actually going to get the home you’ve always wanted.  The document is written in such small font you can’t read half of it, and that which you can read is in legal-eze and you don’t understand anyway. You’re hurried to sign each and every paper, so that the seller and realtor can get paid, and the attorney can go to the next income-producing closing, and before you know it, you’ve been forced into agreeing to pay an extra $100 per month for insurance that guarantees the mortgage will be paid in the event you’re ever unable to (PMI Insurance).  You have never been a day late on those payments in your lifetime, so why do you have to pay this extra money when your payment history speaks for itself? 

Predatory lending, that’s why.  Predatory lending involves getting an unsuspecting customer into a repayment plan for something they 1) cannot afford, and/or 2) do not understand.  Simple solution….read your contract and never assume that just because the lender told you something, it’s true.  The bottom line is no matter what they tell you, what you sign is what holds up in court, and they know this.

I once attempted to refinance my mortgage with a lender that offered no-closing-cost refinancing.  As I was going through the process of signing the closing paperwork, I noted that fees were listed on one of the papers. I pointed this out to the bank, and the nice, smiling lady told me “oh that’s just a technicality, we don’t charge any fees whatsoever” to which I replied “but the paperwork I’m signing says I agree to pay these fees” and once again she said “no, no, it’s just written, but we don’t charge any fees.”  I started laughing and shoved the paperwork back at her, stating “then you sign them because I’m not agreeing to anything unless it’s written.”

So, in a nutshell, regarding mortgages, refinances and any other contracts you’re about to sign:

1. Read each and every document you’re supposed to sign. If you don’t understand what it says, ask that it be explained. If you still don’t understand it, let them know you’re going to consult someone else who can better explain it, and you’re not going to sign anything until you fully understand it.
2. If it looks too good to be true, it probably is.  Bow out.
3. Annual Percentage Rates (APR) are always negotiable, so why does the lender get to tell you what to pay.  Make an offer for a lower rate, and if they say they “can’t," tell them you’ve already had an offer somewhere else and that you will take your business there.
4. Most importantly, remember that you are their source of income and they need your business in order to make money.  Yes, they do have overhead to consider, but that doesn’t include taking advantage of a great, paying, customer.