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Federal Protection Against Predatory Lending

  • Federal Protection Against Predatory Lending

    Federal Protection Against Predatory Lending

    For as long as there have been lenders, there has been predatory lending. Predatory lending was a major factor in the Great Depression, and has again become front page news during the “Great Recession.” The federal government addressed predatory lending directly when Clinton signed the Home Ownership and Equity Protection Act (HOEPA) in 1994. HOEPA addressed specific areas of mortgage law, focusing on commonly used predatory lending techniques. In South Florida, where home sales and foreclosure rates are both on the rise, homeowners must remain vigilant to be aware of changing predatory practices and the laws designed to stop them.

    Predatory lending has always been notoriously difficult to combat because it is not a uniform concept. A loan that may be predatory to some may not be predatory to others. Legislators have long struggled with balancing an individual’s right to contract and the unequal bargaining power that exists between lenders and homeowners. For a loan to be covered by HOEPA it must meet one of three criteria: for an original mortgage, the annual percentage rate (APR) must exceeds the rates on Treasury securities of comparable maturity by more than eight percentage points; for second mortgages, the APR must exceed the rates on Treasury securities of comparable maturity by more than 10 percentage points; and third, the total fees and points payable by the borrower at or before closing exceed the larger of $625 or eight percent of the total loan amount.

    It is important to remember that lenders are not necessarily banned from offering loans that meet the above mentioned criteria. Really, HOEPA just adds an additional level of protection by helping to inform borrowers of their rights and responsibilities under the loan. This result is achieved with the use of written notification about the terms of the loan, usually delivered to the borrower no later than three days before closing. Some features of HOEPA covered loans are expressly disallowed by the law. Balloon payments, negative amortization, most prepayment penalties, and most due-on-demand clauses are just a few of the prohibited practices covered by HOEPA.

    Whether you are purchasing a home for the first time or have purchased a home before, the advice of an experienced attorney is crucial. For homeowners in foreclosure, or who foresee foreclosure in the future, an attorney can help guide you through the foreclosure process and can evaluate whether or not predatory lending had taken place. In South Florida, the Lamchick Law Group,P.A. has guided clients through every real estate situation. Knowing the law is an important step in protecting your rights, but it helps to have experienced attorneys working on your behalf. Always seek the advice of an attorney with experience in your applicable area of law, and always hire an attorney you can trust.  If you believe you have been a victim of predatory lending, contact an attorney immediately.  In addition to evaluating a foreclosure for evidence of predatory lending, the Lamchick Law Group, P.A. has expertise in foreclosure alternatives such as the deed in lieu, short sale, and mortgage modification.  In any situation and in any stage of foreclosure, the Lamchick Law Group, P.A. can help to solve your legal issues.