Podcast
Questions and Answers
What is an example of predatory lending behavior?
What is an example of predatory lending behavior?
- Refusing to approve a loan application without explanation
- Advising a borrower on how to improve their credit score
- Assuring a borrower that their loan will be refinanced favorably (correct)
- Providing multiple loan offers without any conditions
Which of the following actions would NOT be considered predatory lending?
Which of the following actions would NOT be considered predatory lending?
- Failing to describe disadvantageous loan terms
- Providing accurate information about loan terms (correct)
- Encouraging an applicant to misrepresent their income
- Concealing property defects from the borrower
How can a lender take advantage of borrowers who do not read their loan documents?
How can a lender take advantage of borrowers who do not read their loan documents?
- By allowing borrowers to negotiate the terms
- By requiring a co-signer for the loan
- By concealing or misrepresenting important details (correct)
- By explaining all terms clearly
What constitutes predatory lending when it involves borrower deception?
What constitutes predatory lending when it involves borrower deception?
What is a common practice in predatory lending regarding loan applications?
What is a common practice in predatory lending regarding loan applications?
What is the main objective of predatory lending?
What is the main objective of predatory lending?
Which of the following is NOT considered a prohibited practice of predatory lending?
Which of the following is NOT considered a prohibited practice of predatory lending?
What does the practice of 'steering' involve?
What does the practice of 'steering' involve?
Which of the following is a consequence lenders may face for engaging in illegal steering practices?
Which of the following is a consequence lenders may face for engaging in illegal steering practices?
How can deception manifest in predatory lending scenarios?
How can deception manifest in predatory lending scenarios?
Which federal rules does the practice of steering violate?
Which federal rules does the practice of steering violate?
What type of loan could be classified as mortgage steering?
What type of loan could be classified as mortgage steering?
Who can be guilty of steering in the context of real estate transactions?
Who can be guilty of steering in the context of real estate transactions?
Flashcards
Misrepresenting intended occupancy
Misrepresenting intended occupancy
Encouraging an applicant to provide false information about how they will use a property.
Loans disguised as gifts
Loans disguised as gifts
Disguising a loan as a gift to circumvent lending rules.
Misrepresenting income for low-income programs
Misrepresenting income for low-income programs
Providing false information about income to qualify for low-income programs.
Concealing disadvantageous loan terms
Concealing disadvantageous loan terms
Failing to disclose or hiding negative aspects of a loan's terms.
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Promising refinancing to borrower's advantage before terms change
Promising refinancing to borrower's advantage before terms change
Taking advantage of a borrower's trust by leading them to believe a loan will be refinanced favorably before it's actually possible.
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Predatory Lending
Predatory Lending
Taking advantage of borrowers through excessively high fees, misrepresented loan terms, and frequent refinancing that doesn't benefit them.
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Mortgage Steering
Mortgage Steering
The act of influencing a borrower's choice of loan based on discriminatory factors, potentially directing them towards higher-cost options that benefit the lender.
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Steering (Fair Housing)
Steering (Fair Housing)
A prohibited practice where a lender, real estate agent, or another influencing party directs potential buyers or renters towards or away from specific communities based on discriminatory factors.
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Deception in Predatory Lending
Deception in Predatory Lending
Deceptive practices used in predatory lending, which can involve misleading borrowers about loan terms or leading them to participate in deceptive activities.
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Regulations to Prevent Predatory Lending
Regulations to Prevent Predatory Lending
Regulations requiring clear disclosures to borrowers and prohibiting certain practices in the lending process to prevent predatory lending.
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Mortgage Steering (Lender's Perspective)
Mortgage Steering (Lender's Perspective)
Directing borrowers towards loans with higher interest rates or less favorable terms, putting the lender's profits ahead of the borrowers' well-being.
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Consequences of Steering
Consequences of Steering
Steering can be illegal and result in serious consequences, including fines, civil penalties, reputational damage, license revocation, or a combination of these.
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Steering and Fair Housing
Steering and Fair Housing
Steering is a violation of federal fair housing rules, which prohibit discrimination in real estate transactions.
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Predatory Lending Defined
- Predatory lending exploits vulnerable borrowers.
- It involves excessive fees, misleading loan terms, frequent (non-beneficial) refinancing, and other prohibited acts.
- Targets consumers lacking understanding of loans and processes.
- Regulations demand clear disclosures and prohibit specific practices.
Steering Defined
- Steering is influencing a buyer's or tenant's choice of housing based on bias or discrimination.
- Includes influencing seller's decision on offers with bias.
- Can be committed by lenders, real estate agents or anyone influencing consumer choices.
- Steering in loan choices is illegal (e.g., directing to higher-cost FHA loans when a conventional loan is possible).
- Violations can lead to significant fines, penalties, reputational damage, and license revocation.
Predatory Lending Scenarios
- Deception: Loan originators or lenders deceive borrowers.
- Misrepresenting occupancy, disguising as gifts, misrepresenting income for low-income programs, concealing unfavorable loan terms, or helping conceal property defects are all predatory acts.
- Relying on the mortgage loan officer (MLO) for understanding while signing loan documents without reading is a predatory practice.
- Promising advantageous refinancing prior to unfavorable terms becoming effective is predatory.
- Hiding or covering up property (collateral) defects/conditions is predatory.
- Deception, misrepresentation, or unethical conduct by the lender—regardless of borrower participation—is considered predatory lending.
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