I wrote an article a few weeks back regarding predatory lending and the elderly. The calls and comments were unbelievable. We are being hunted by a large magnitude of racial disparity. Why? Our combined total income would make us the 8th largest country in the world, but because we are not united, they move into our neighborhoods, set up shops and take our money back to their neighborhoods.
The article you are reading is the first in this small series, part two will cover refinancing loans and subprime lending, part three will cover conventional loans and subprime lending and the last article will cover tactics on how to prevent being preyed upon. Keep in mind that the scope of this subject matter goes far beyond the 600 plus words granted here.
To compensate you, I have written a small booklet to cover 26 areas of predatory lending and its effect on us as African Americans. In addition to the booklet I am also composing a dictionary of mortgage lending terms we can relate to. Some of the lending terms and phrases I use can be overwhelming at times and it is my intentions to educate and inform you completely. Both are free of charge and a phone call to me is all it takes. By now you know the number, but here it is again. 909-248-4830 ext. 228.
Lets get down to business. First you need to be aware of the Home Mortgage Disclosure Act (HMDA) also referred to as Regulation C, which implements HMDA. This Act covers many areas in mortgage banking and I encourage you to read up on it. By strategically using this Act we can end or at least put a dent on institutional racism.
One important thing this Act does is track mortgage bankers, brokers and originators with their practices and clientele base. As an example, if a lender works only with African Americans and consistently overcharges them in points, fees or origination, HMDA could be aware of this predatory lending practice and help convict them of this felony and close the office. Theres only one catch. You have to disclose your information accurately on your application including race, sex and age in order for them to weed out the misfits taking advantage of us. Heres the scary part, estimates have been made that 67% of all loans are not reported in HMDA data.
Secondly, be aware that there are 500 or more different loan programs available but only a few types. The standard types include Conventional, FHA and VA loans. The guidelines to grant you a loan program with anyone of these are based on the mortgage company and the programs available. In my opinion, four areas should be analyzed by the lender to determine if you are qualified; Borrower, Credit, Income, Property.
If one of these areas are extremely weak and cant meet the guidelines of the standard types, optional financing can be considered with your permission. One of the most commonly known optional loan types is a Subprime Mortgage Loan. In short, a subprime mortgage is given to a borrower that has conditions outside the guidelines of the standard guidelines set by Conventional, FHA or VA loans.
Subprime loans can have higher interest rates, prepayment penalties, adjustable rate mortgages, higher closing cost fees, higher discount points and higher origination fees. Heres the problem, sometimes we are placed in subprime loans when we are actually eligible for a standard type of loan. Some predatory lenders make a living off of us just doing this sort of business.
Nationally, subprime loans were estimated at $200 billion in 1998 and rising at 10% to 25% annually and African American homebuyers have been placed in these loans more than any other nationality. I will give you the alarming disproportionate statistics next week. Are we the prey?
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