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Table of Contents

I. Introduction

.......................................................................................................1A. What is Predatory Mortgage Lending?.............................................................................1B. What Remedies are Available?........................................................................................1C. Primary Tools .....................................................................................................2

II. Who Are the Victims?

.....................................................................................................3

III. What are the Signs?

.....................................................................................................7A. Assorted Lending Practices and Home Loan Products.....................................................7B. Targeted to Vulnerable Populations...............................................................................13

IV. How Predatory Practices Developed

...............................................................................17A. Contributing Factors ...................................................................................................17B. Consequences ...................................................................................................18

V. How to Prepare A Case

...................................................................................................21A. Client Intake ...................................................................................................21B. Essential Documentation................................................................................................22

VI. Consumer Remedies

...................................................................................................29A. Introduction ...................................................................................................29B. Technical Defense to Foreclosure.................................................................................29C. Truth in Lending Act ...................................................................................................29D. Home Ownership and Equity Protection Act...................................................................35E. Real Estate Settlement Procedures Act..........................................................................39F. Unfair and Deceptive Acts and Practices.........................................................42G. Other Remedies ...................................................................................................43H. Reverse Mortgage ...................................................................................................47

Bibliography

...................................................................................................51

Appendices

A. Early Warning Signs of Predatory Lending.....................................................................59B. Case Studies 61C. Interview Guide ...................................................................................................65D. Players and Possible Defendants...................................................................................71E. Good Faith Estimate ...................................................................................................73F. Fixed Rate Loan Note ...................................................................................................75G. Prepayment Addendum to Note......................................................................................77H. Truth in Lending Disclosures..........................................................................................79I. Sample HUD-1A Form 81J. Reading Between the lines of HUD-1A...........................................................................83K. What Happened to the Mitchells?...................................................................................85L. Notice of Right to Cancel................................................................................................87M. Regulation Z Disclosures ...............................................................................................89N. Notice of Right of Rescission..........................................................................................91O. Notice of Rescission ...................................................................................................93P. State Predatory Lending Laws and Regulations.............................................................95Q. HECM Reverse Mortgages: Credit Available to Older Homeowners...............................97

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I. INTRODUCTION

SEE

: OCC Advisory Letter2003-2 (2-21-03), available atwww.occ.treas.gov/advlst03.htm

SEE:

AARP

Subprime Mortgage Lending and Older Americans (2001)

NOTE:

A Subprime Mortgageis a type of mortgage given toa borrower with a less-than-perfect credit report. Lenderscharge a higher interest rateon subprime mortgages andargue that they do so tocompensate for potentiallosses from customers.

NOTE:

As of 2004, FreddieMac and Fannie Mae will notinvest in subprime mortgagesthat contain arbitrationclauses.See,www.blankrome.com/publications/fsconslend/updatesummer2004-3.asp

A. WHAT IS PREDATORY MORTGAGE LENDING?

1. Mortgage lending becomes predatory when vulnerableconsumers are subjected to practices such as:a. Extending loans with terms that borrowers clearlylack the ability to repayb. “Flipping” loans - Frequent refinancings thatgenerate additional loan fees, prepayment penalties,and fees from credit-related productsc. Targeting excessively expensive credit products toolder borrowersd. “Packing” of excessive and/or hidden fees in theamount financedd. Enticing borrowers to take on additional debt byusing fraudulent or misleading sales tacticse. Charging unnecessarily high interest rates and feesf. Using balloon payments to conceal true burden offinancingg. Inadequate disclosure of true costs and risksh. Use of mandatory arbitration clauses2. While most predatory practices are found within subprimeloans, not all subprime lenders are predatorya. Subprime lending provides opportunities for thosewith less than perfect credit to have access to fundsto purchase homes and pay for major purchasesb. Access to constructive credit should and can bepromoted and advancedc. The elimination of predatory practices does notequate to the reduction of availability of credit

B. WHAT REMEDIES ARE AVAILABLE?

1. Rescission that voids the lender’s security interest, enablingclients to get back fees and interest paid 2. Statutorypenalties designed to curtail predatory practices3. Actual and/or punitive damages under Unfair and

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