Several months ago, the 3,000-member California Association of Mortgage Brokers (CAMB) created the first real definition to describe the abusive lending practices of predatory lenders. According to the CAMB, predatory lending was described as "placing consumers in loan products with significantly worse terms and/or higher costs than loans offered to similarly qualified consumers in the region for the primary purpose of enriching the originator and with little or no regard for the costs to the consumer."

Most mortgage brokers provide good service to their clients, yet there are a few who use unethical practices. Those brokers, called "predatory lenders" by the CAMB, not only over-charge consumers, but they also get paid in other hidden ways.

For instance, avoid lenders who charge more than the usual three percent fees for a conventional loan or four percent fees for a government-sponsored loan. Even non-prime lenders can't justify excessive fees.

Also watch for hidden loan costs, such as the Yield-Spread Premium. This term refers to a rebate that's given to brokers when they place a borrower at an interest rate higher than the rate for which they qualify. Refuse to pay yield-spread premiums and unwarranted fees, and avoid brokers who include these charges in their loans.

Besides charging high points and fees, predatory lending practices may also include such things as "packing" credit insurance on to a loan, making mortgage loans to homeowners who don't have the income to repay them, and repeatedly refinancing loans.

When it comes to obtaining a real estate loan, it's your responsibility to become a knowledgeable consumer, which means you'll need to keep asking questions of your lender. If you aren't able to get clear, easily understandable answers to your questions, it's possible that you may be dealing with a predatory lender.

Copyright 2005 Jeanette J. Fisher - All Rights Reserved.