Predetory Foreclosure - Foreclosure Due To Predatory Lending

This article discusses what happens if a foreclosure due to predatory lending occurs.  It explains exactly what predatory lending is as well as how to prevent it.

Foreclosure can be a scary thing for homeowners to go through but foreclosure due to predatory lending is even scarier. First, let’s define foreclosure. Foreclosure is when a bank or secured creditor repossesses a piece of property because that property’s owner did not follow through on a deal. The repossession of a piece of property, most likely a house, is what foreclosure is most known as.

Predatory lending is the practice of a lending party convincing a borrowing party to agree to terms of a contract in a deceptive way. These terms can be abusive and unfair but the lending party does it in a way that that the borrowing party has no idea what is happening.

The lending party can also deceive the borrowing party even when the loan is already in place. Most times this can lead to the borrowing party not being able to protect themselves from the ramifications or even to defend themselves from such things happening in the future.

Foreclosure due to predatory lending is an extremely common case of foreclosure today. Many property owners use their car(s) or house(s) as collateral when signing a loan.

What this means is that if the borrowing party defaults on the loan, or breaks its contract terms, then the lending party can repossess the property. The lending party benefits from this process because they can then sell the property, whatever it is, for a profit.

Not Yet an Epidemic But Still a Problem

Predatory lending has become such a problem in the United States, especially since it has caused countless foreclosures, that 25 states within the country have some sort of law against predatory lending. Those states include New Jersey, New York, California, Florida, Utah, Wisconsin, Maryland and many more.

There are corporations within the United States that have made it their personal goal to stop, or limit, predatory lending because of the problems it causes throughout the social classes in the country. Corporations such as ACORN, AARP and Inner City Press have targeted major corporations in the battle against predatory lending. Those corporations are HSBC Finance and H&R Block.

How to Prevent Predatory Lending

 Predatory lending can be easily prevented. As described by the United States Department of Housing and Urban Development (HUD), predatory lending can be avoided by following their 11 easy steps. One of the most important tips that HUD provides consumers is to interview and research any potential real estate personnel before deciding to use them to buy or sell a home.

Another important tip provided by HUD is to not sign any contract that confuses the parties involved. Always make sure that all information is clear and understandable before applying a signature to a document.

HUD also advises that no one should be convinced to borrow more money than they can afford to repay over a period of time. Don’t forget to notice the signs of predatory lending when purchasing a piece of property. Predatory lenders sell properties for more than they are worth by using appraisals that are mostly false and like to charge different fees for products and services that were not performed or even offered by the lenders.

Predatory lending is a widespread problem within the real estate industry but consumers can protect themselves by following those safety tips from HUD and just knowing the warning signs of a predatory lender.