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What is Predatory Lending? > Predatory Lending Warning Signs > How to Avoid Predatory Lending > Summary of NJ Statute > List of Approved Credit Counselors > Glossary of Mortgage Terms > Other Resources > Press Releases

"Predatory lending," has become shorthand for describing a variety of lending practices that may be disadvantageous to borrowers. Abusive or predatory lending - whether undertaken by creditors, mortgage brokers or home improvement contractors - may involve fraud or deception, manipulating borrowers through aggressive sales tactics or taking unfair advantage of a borrower's lack of understanding about loan terms. These practices occur most frequently in the subprime lending market and target lower-income and minority borrowers.

The term "predatory lending" covers a potentially broad range of behavior and does not lend itself to a concise or comprehensive definition. However, predatory lending typically involves at least one, and perhaps all three of the following elements:

• making unaffordable loans based on the assets of the borrower, rather than on the borrower's ability to repay an obligation ("asset-based lending")
  
  
• inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced ("loan flipping")
  
  
• engaging in fraud or deception to conceal the true nature of the loan obligation from an unsuspecting or unsophisticated borrower.

1. Shop around.
2. Question "Up Front Fees."
3. Make sure to use a licensed lender.
4. Ask for a "Good Faith Estimate."
5. Have some idea what you should qualify for.
6. Find out if your monthly payments will change during the loan term.
7. Find out if there is a "balloon" payment due. Some loans may have small monthly payments, but require a big "balloon" payment at the end of the loan period.
8. Request a review of your settlement sheet three days before closing.
9. Find out if you have a three-day "right of rescission."

10. Do not sign any waiver of rights.
11. Find out if the loan amount includes various other insurance policies.
12. Find out if your taxes are included in your monthly payment.
13. Make sure that you are not rushed or pushed into the loan process.
14. Ask the lender as many questions as you can.
15. Ask if the loan has a prepayment penalty.
16. Again, shop around.
17. Read all documents carefully before signing.
18. Do not sign any documents with blank spaces.

Tools

• Search for a NJ Licensed Lender
• What Interest Rate Should I Pay? (PDF)
• List of Approved Credit Counselors
• Consumer Credit Bill of Rights
• Get a Free Credit Report

Legislation

• NJ Home Ownership Security Act of 2002 (PL 2003, C. 64) (PDF)
• NJ Consumer Fraud Act
• US Fair Credit Reporting Act
• Bulletins: (PDFs)
  • Bulletin 04-22
  • Bulletin 03-30
  • Bulletin 03-15

Other Entities

• NJ Housing and Mortgage Finance Agency
  • Home Buyers (mortgage calculator, loan programs, approved lender list, etc.)
  • Home Owners (refinance information, etc.)
  • Renters (affordable rentals list, etc.)
  • Seniors (reverse mortgage, rentals, etc.)
  • Special Needs (housing resources, etc.)
• U.S. Department of Housing and Urban Development (HUD) (information for home buyers, renters, foreclosure, loans, public housing, etc.)
• Federal Reserve Board
  • Looking for the best mortgage
• Federal Deposit Insurance Corporation (FDIC)
  • How to avoid predatory lending traps
  • Questions to ask before signing a loan contract
  • Examples of predatory practices
    

• Announcement: Federal Home Loan Bank of New York (November 2003)
• Department gratified with Standard and Poor's positive outlook on consumer home loan protection law (November 2003)
• OTS Exemption of federal institutions (August 2003)
• Household Settlement (August 2003) > More information...
• Predatory Lending (July 2003)