legally speaking Have You Been a Victim of Predatory Lending Practices? By Omar J. Arcia, Esq., Foreclosure Defense and Bankruptcy Protection Attorney
P
redatory lending is when a lender imposes abusive, unfair and sometimes illegal loan terms on borrowers, without regard for the borrowers’ ability to repay the loan. When two or more of the following factors are contained in a mortgage loan transaction, the subsequent forensic audit performed on that transaction usually reveals serious violations of federal and state lending laws.
Property Purchased or Refinanced Between 2003 and 2007.
This four year period marked the peak of the real estate boom in South Florida. Just about anyone, including foreign nationals without any past credit history, could obtain a “sub-prime” loan for all the value of the mortgaged property. The sub-prime mortgage market thrived during this time, allowing borrowers to encumber their properties well beyond their true market values.
Mortgage Loan Contains an Adjustable Rate or “ARM” Feature.
These types of loans are initially set at an artificially low interest rate for a brief period of time. They then switch to an adjustable rate for the remaining term of the loan, and the rate can increase as often as every six months. Even if the U.S. interest rate index remains unchanged, the monthly payments on these loans could increase by up to 50%. These loans have the highest delinquency rate of any other loan product.
Mortgage Loan Contains Negative Amortization.
Negative amortization occurs when the monthly mortgage payment is not sufficient to even cover the interest due, and therefore, the balance of the loan increases over time even though payments have been made. If you owe more today on your home loan, than when you originally purchased or refinanced, your loan is negatively amortized.
Mortgage Loan is Interest-Only or Pick-a-Payment.
Under these types of loans, the borrower is only required to pay the interest due on the loan or some other minimal payment that does not even cover the interest on the loan. After a few years, the required monthly payment is usually increased to cover the outstanding balance. Once the loan payment is increased, so does the likelihood the borrower will default, and eventually be subjected to foreclosure.
Mortgage Loan Approval Based Only on Stated Income.
Roughly half of all sub-prime borrowers from 2003-2007 were given “stated income” loans, in which they were qualified based on statements in the loan application as to their income. These statements of income were largely unverified, and often the “stated income” required for the loan to be approved was the exact amount included in the application by the mortgage broker. If any of these factors apply to your current loan, you should at least have a professional forensic audit performed to find out whether you have any viable claims against your lender. If your claims are timely and properly raised, you may be entitled to reduce the amount you owe, or cancel your loan obligation altogether. A more detailed explanation of these factors, different options available to homeowners in foreclosure, and key foreclosure defense strategies are discussed in a new instructional DVD developed by the Arcia Law Firm entitled “Fight for Your Home,” which is available in both Spanish and English. Contact the Arcia Law Firm to receive a FREE copy of this DVD (which retails for $39.95 plus S/H). The Arcia Law Firm is privileged to defend dozens of homeowners in our community in foreclosure and bankruptcy cases. If you are struggling to make your monthly mortgage payments, or if you just received a foreclosure summons, contact the Arcia Law Firm at 1-800-770-7102 to schedule a free consultation, or visit www.arcialawfirm.com .
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May 2011
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