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Failure to accurately disclose terms and conditions: The law requires that lenders clearly disclose any loan terms and conditions to borrower. Predatory lender will try to mislead borrowers. In some case, lender may actually alter the loan documents.
Risk-based pricing: Predatory lender may claim a potential borrower as a great credit risk to charge borrower at the higher price.
Abusive prepayment penalties: Prepayment penalty refers to a fee for paying off a loan early. Over eighty percent of loans have some sort of prepayment penalty. Typically, an abusive prepayment penalty will cost more than six months’ interest. Prepayment penalties should never be more than 2% of the home loans.
Excessive Fees: The loan fees are typically less than 1% of the loan amount. On the other hands, Predatory lenders may charge up to 5 % of the normal loan amount.
Unnecessary Loan Products: Dishonest lenders may try to sell more than necessary insurance or other products to borrowers.
Mandatory Arbitration: “Mandatory arbitration” refers to contract which will prevent borrower to seek legal help in court, even if the loan is illegal or abusive. If lenders try to force you to sign such contract, be aware.
Yield Spread Premiums: Yield spread premium refers to a kickback for making the loan more expensive to the borrower.
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