“If your elderly loved one is not careful, a predatory lender may lock her into a financially abusive loan that can be devastating.”
Predatory lending schemes target the elderly with loans that have unreasonable terms or conditions. The security for the loan is the elderly person’s home. When he cannot make the high payments, he may lose his home equity or even his home. This article presents information that you can use to protect your elderly loved ones from predatory housing schemes.
Why would an elderly homeowner borrow money?
Many seniors are home-rich and cash-poor. This means that all of their assets are tied up in their homes, but they have little cash or a small monthly income stream. If the senior needs more money than she has in liquid assets to pay for property taxes, medical bills, home repairs or other large ticket items, she may be tempted to use the equity in her home to ease the current financial crisis.
What are tip-offs that a loan may be predatory?
Here are a few indicators that the loan may be predatory:
You are being pressured to borrow money for unnecessary or unwanted home improvements.
The loan includes excessive fees, cleverly tucked into the loan to make them less noticeable than fees you would pay upfront or out-of-pocket.
You cannot realistically make the payments on your income.
The loan has deceptive marketing and easy approval.
Other lenders would not approve you for a loan of this amount.
There is a large balloon payment at the end of the loan term.
What tactics do predatory lenders use?
Some unethical lenders and mortgage brokers will make false statements about the borrower’s income on the loan application. These predators have even added the names of non-existent co-signers, forged signatures and made loans to mentally incapacitated homeowners. If your elderly loved one is not careful, a predatory lender may lock the senior into a financially abusive loan that can ultimately result in the senior losing their home.
How do the predatory lenders make money from these schemes?
Here are just a few examples of how unscrupulous brokers and lenders profit from ripping off the elderly:
Lenders pay kickbacks to brokers who hook seniors into these bad loans.
The loans contain excessively high interest rates, closing costs, loan origination fees, points, recording fees, appraisal costs, penalties and bogus fees.
The lenders repeatedly flip (refinance) the loan to collect duplicate loan fees.
The lenders commit foreclosure abuses.
What can be done to help an elderly homeowner who is the victim of a predatory loan?
Every state has different laws, but in general, your lawyer can use these laws to help you:
Truth in Lending Act (TILA) gives a homeowner the right to rescind a money loan secured by the home, if the loan was not used to purchase the home. The rules are strict and the borrower must closely follow the rules to benefit from the right to rescind.
The Home Ownership and Equity Protection Act (HOEPA) added many protections to the TILA. It provides penalties (damages and attorney fees) for violations.
Your state laws that prohibit unfair and deceptive business practices, may allow you to challenge a predatory loan.
Taking on a mortgage broker or lender for a predatory loan is challenging and difficult. A lawyer can help protect your rights. Since every state has different laws, always talk with an elder law attorney in your area.
Metropolitan Boston Housing Partnership. “Predatory Lending Fair Housing Fact Sheet.” (accessed July 25, 2017) http://mbhp.org/wp-content/uploads/2013/06/Predatory-Lending-Fair-Housing-Fact-Sheet.pdf
American Bar Association. “A Brief Primer on Fighting Predatory Lending Practices.” (accessed July 25, 2017) https://www.americanbar.org/newsletter/publications/law_trends_news_practice_area_e_newsletter_home/0509_business_predatorylending.html
National Consumer Law Center. “Helping Elderly Homeowners Victimized by Predatory Mortgage Loans.” (accessed July 25, 2017) https://www.nclc.org/images/pdf/older_consumers/consumer_concerns/cc_elderly_victimized_predatory_mortgage.pdf