If you are a victim of predatory lending and facing foreclosure, speak to an experienced Sandy Utah foreclosure lawyer.
While predatory home mortgage lending is a highly disturbing and relatively new phenomenon, no one ought to be surprised at its existence. Ours is a society, a capitalist/market economy, a political system that breeds predatory behavior, particularly against the most vulnerable segments of the population, throughout and consistently.
(Just to give the term an additional grim flavor, my dictionary uses these descriptive definitional terms: “plundering,” “pillaging,” “marauding.”) Whether it’s the criminal justice system, the health system, the education system, or any other of the society’s basics, “the poor pay more” (in David Caplowitz’s phrase and title from his 1967 classic), get less, get shafted. And of course, within the housing system, predatory lending is just one piece of the larger picture. Among the other ways the housing system disappoints and preys upon poor, elderly, and minority residents are redlining (mortgage and insurance versions); evictions; discrimination by landlords, lenders, real estate agents, and other gatekeepers; excessive housing cost burdens; poor code enforcement; gentrification pressures; and so on.
Those victimized by predatory lending are primarily persons who already own their homes, although a certain portion of this nefarious activity is foisted upon renters desiring home ownership. And in this regard, we need to question the (bipartisan) push to have everyone attain “the American dream”—a political, advertising, and cultural campaign that unfortunately causes grief for all too many households. While the nation’s home ownership rate has been rising, so has the foreclosure rate—primarily, of course, for low-income households.
The distinction between subprime and predatory lending can be fuzzy. The National Community Reinvestment Coalition (NCRC) recently offered the following definitions to help clarify the differences. NCRC defined subprime lending in the following terms:
A subprime loan is a loan to a borrower with less than perfect credit. In order to
compensate for the added risk associated with subprime loans, lending institutions
charge higher interest rates. In contrast, a prime loan is a loan made to a credit-
worthy borrower at prevailing interest rates. Loans are classified as A, A–, B, C, and D loans. “A” loans are prime loans that are made at the going rate while A–
loans are loans made at slightly higher interest rates to borrowers with only a few
blemishes on their credit report. So-called B, C, and D loans are made to borrow-
ers with significant imperfections in their credit history. “D” loans carry the high-
est interest rate because they are made to borrowers with the worst credit histories
that include bankruptcy.
Predatory loans are defined in the following terms:
A predatory loan is an unsuitable loan designed to exploit vulnerable and unso-
phisticated borrowers. Predatory loans are a subset of subprime loans. A predatory
loan has one or more of the following features: 1) charges more in interest and fees
than is required to cover the added risk of lending to borrowers with credit im-
perfections, 2) contains abusive terms and conditions that trap borrowers and lead to increased indebtedness, 3) does not take into account the borrower’s ability to repay the loan, and 4) often violates fair lending laws by targeting women, minorities and communities of color.
A variety of predatory practices have been identified. They include the following:
• Higher interest rates and fees than can be justified by the risk posed by the borrower.
• Balloon payments requiring borrowers to pay off the entire balance of a loan by making a substantial payment after a period of time during which they have been making regular monthly payments.
• Required single premium credit life insurance where the borrower must pay the entire annual premium at the beginning of the policy period rather than in monthly or quarterly payments; with this cost folded into the loan, the total cost, including interest payments, is higher throughout the life of the loan.
• Forced placed home insurance, where the lender requires the borrower to pay for a policy selected by the lender.
• High prepayment penalties, which trap borrowers in the loans.
• Fees for services that may or may not actually be provided.
• Loans based on the value of the property with no regard for the borrower’s ability to make payments.
• Loan flipping, whereby lenders use deceptive and high-pressure tactics resulting in the frequent refinancing of loans with additional fees added each time.
• Negatively amortized loans and loans for more than the value of the home, which result in the borrower owing more money at the end of the loan period than when they started making payments
Subprime lending is not a new business. Lending to people with blemished credit histories has been around seemingly for as long as there have been creditors and debtors. Examples of the long-standing tradition of subprime lending in the United States run the gamut from pawnshops to the more positively regarded community development home loans. Subprime lending has, however, changed since the 1980s as the technological, macroeconomic, and legal frameworks in which these transactions take place have evolved, giving rise to increasingly sophisticated operations and substantial growth. Accompanying this growth has been the notable emergence of predatory home mortgage lending within the subprime credit sector.
About 90 percent of foreclosure cases involve homeowners who were put into foreclosure without being given their options. The banks handle many loans and sometimes outsource collection efforts so that borrowers don’t get the case-by-case treatment that they should.
For their part, bank officials say they make extraordinary efforts to avoid taking a home. Most of the time, foreclosing is actually much less profitable than keeping the homeowner in the house. Homes in foreclosure normally sell at deeply discounted prices.
But both sides can agree that many homeowners facing defaults on their loans don’t know what steps they can take to avoid foreclosure. That misdirection can lead to thousands of dollars in attorneys fees and foreclosure sales. The lack of knowledge of those services is something that officials at the U.S. Department of Housing and Urban Development admit is a problem. Loans insured by the Federal Housing Administration carry special safeguards to help buyers who fall behind on payments.
Banks can sometimes temporarily suspend or reduce payments in the event of a hardship, and loans insured by the Federal Housing Administration are sometimes eligible for one-time payments from the government.
But sometimes, lenders either don’t do an adequate job informing the owner of his options or the owner doesn’t take advantage of them before it’s too late.
If you are one of the many people lurching toward foreclosure, there are a few things you can do before that final crash.
Which options are right for you? Where can you go for good advice? Most important, whom can you trust when you’re wading through all the dot-com sites on the Internet that promise instant relief, easy credit repair and a quick resolution to all your problems?
The U.S. Department of Housing and Urban Development (HUD) offers easy-to-understand on-line advice on how to avoid foreclosure. It’s available on the HUD Web site. The site provides links to HUD-approved housing counseling agencies that have information on free credit counseling and other services.
Still feeling overwhelmed? You may want to consult an experienced Sandy Utah foreclosure lawyer.
It makes sense to work with someone who knows the rules. People may have their own ideas about what they want to do, but banks are not necessarily going to agree. They’re used to putting round pegs into round holes.
Of course, it is best not to start down that slippery slope. Many foreclosures could have been prevented had the homeowner just recognized a few warning signs. These include missed mortgage payments, late notices and collection attempts.
If you have missed only one payment, you have a number of options available to you. Miss several payments, and the options start to disappear.
Anyone can find himself in unexpected financial circumstances and subject to foreclosure.
Whether you’re in straitened circumstances because of business conditions, illness or a lifestyle that ultimately has worked against you, the fact is, you’ll have to formulate a goal about what to do.
The most important thing is to set a goal about what you want to have happen. Then, it’s all about what you have to do to manage to keep that goal. That goal may or may not include keeping your house.
If your monthly house payment, including property taxes and insurance, does not exceed 40 percent of your gross monthly income, you should consider selling or transferring the property to avoid negative impacts to your credit. For some people, that can be a relief.
In fact, it may not be feasible economically to keep your house. If your house is worth more than you owe on it, selling it can allow you to pay off your mortgage, back payments and penalties. At the worst, you want zero equity. You never want negative equity.
For most people, holding onto the house is crucial. The key to ensuring that will happen is to take a proactive approach to your debt.
Just starting down that slippery slope? Only missed a few payments? The worst thing you can do is to do nothing. Communication is key. The most common but absolutely the worst response to mounting debt is simply to bury your head in the sand. Instead, you should talk directly with your lender.
To a lender, foreclosure is the last resort, especially since the process is expensive, time-consuming and unprofitable. In a situation called “special forbearance, your lender will try to arrange a repayment plan that is tailored to your financial situation. In some instances, this can include a reduction or even a temporary suspension of your payments. A deferred payment program allows you to make up past-due amounts by adding them to your regular payments. Your lender also may be able to work with you to obtain an interest-free loan from HUD to bring your mortgage current.
You have to make sure that you will be able to make the new payments. People always make the mistake of thinking they will be able to do it, and then suddenly they have double trouble. Talking to a consumer credit counseling service can help you consolidate your bills and get budgeting advice. Be careful here, though. Some “counseling” services actually function as fronts for lawyers who want to steer you into bankruptcy proceedings. Others charge for services rendered. According to HUD, if you are paying for a consumer credit counseling service, you may be paying for a service you could do yourself or for free with the help of a HUD-approved housing counseling agency.
Whether you are working on your own or with a counselor, it’s important to get a clear picture of your circumstances. That can be difficult, especially if you are one of those people whose head-in-the-sand approach has gotten you into this predicament in the first place.
Make list of your expenses under six categories:
• Essential expenses – food.
• Very important expenses, such as first mortgage, rent, other mortgages, utilities and work-related transportation.
• Important expenses, including clothes, taxes, other transportation and credit-card payments if credit is good.
• Regular expenses, including daily expenses, the cost of household goods and credit-card payments if credit already has been affected.
• Luxury expenses, such as entertainment, vacations and jewelry.
• Wasteful expenses, including gambling, playing the lottery or falling for get-rich-quick scams.
You have to be willing to take a real hard look at what got you into trouble in the first place. You may have to make some major changes in your lifestyle. After determining your financial situation, it’s time to consider your options. Mortgage modification allows you to refinance your debt or extend the term of your loan. After paying a lump sum to the bank, you then can re-amortize or extend the loan.
Then there’s refinancing. Most people, should be able to refinance their homes with second mortgages. The problem comes if you haven’t come to terms with what got you into trouble in the first place. If you have an ongoing income problem, going from a $20,000 to a $30,000 mortgage isn’t going to help. You’ll default on that too.
A short sale can be useful if you owe more money on your house than it is worth. Though it may not save your house, it saves your credit and allows you to rehabilitate your finances and credit history. Keep in mind, though, that the money waived by the lender is treated by the IRS as taxable income.
Often seen as a last resort, a deed in lieu of foreclosure means that you stave off foreclosure by returning the house to the lender. The bank keeps the deed, and you move out, but you won’t have that black mark on your credit.
If you do have to file bankruptcy, a Chapter 13 bankruptcy reorganization will stop a foreclosure. It’s a misconception with bankruptcy that you’ll automatically lose your house. That’s absolutely not the case.
In the end, it all boils down to just three simple classes of things: the things you can do, the things the bank can do, and the things you both agree to do. The bottom line is, most banks would rather have their money than have your house. But the most important thing is to get in touch with an experienced Sandy Utah foreclosure lawyer.
Sandy Utah Foreclosure Lawyer Free Consultation
When you need legal help for a foreclosure in Sandy Utah, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506