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Company Loan Type APR Est. Pmt.

penalized for predatory lending practices

Posted on: 06th Feb, 2007 01:33 pm
do regulatory authorities take action against predatory lending practices? anyone can give one practical example where a lender was penalized?
Hi Brewton,

Welcome to Mortgagefit forum.

The regulatory agencies do take action against predatory lenders. I can give you one example where a South Florida lender's predatory lending practices were monitored by state regulators and revocation of his license was sought.

An administrative complaint was filed against First Mortgage America, Inc. which was providing loans through several of its offices and was also known as The Financial Group, Inc.

After the complaint was filed by Office of Financial Regulation (OFR), a statewide examination into their activities was started. The regulators took action after receiving around 50 complaints against them for misrepresentation of loan terms & fees and other conditions of a loan and also for misleading advertisement.

Colin
Posted on: 06th Feb, 2007 01:47 pm
I have got some more information about them.

What this company actually did was to advertise very low interest rate over radio and potential borrowers were led to believe that these rates would be for FRMs while actually they were for ARMs. It also came to light that they underestimated or failed to disclose the total cost a borrower would have to incur in obtaining the mortgage.

Their loans were so structured that monthly payments would not be sufficient for covering the principal and interest amount for the loan every month. This was resulting in an increase in their loan balance instead of it getting decreased.

Thanks
Blue
Posted on: 06th Feb, 2007 02:04 pm
I have some other details about action taken by regulatory agencies to prevent predatory lending and mortgage fraud.

The Washington Department of Financial Institutions (DFI) has a very successful Mortgage Fraud Prosecution Law.

In the last two years thirty one cases of mortgage fraud have been investigated, out of which fifteen have been referred for prosecution. 8 cases have been charged & 5 were convicted. The convicted were sentenced to prison terms in the range of few months to up to 7 years.

From these statistics you can verify that if anyone engages in such unfair practices the regulatory authorities are keeping an eye on them. They can not continue to scam people for long.

Cary Elwes
Posted on: 06th Feb, 2007 02:43 pm
Michigan has also undertaken measures to regulate the mortgage transactions. One main concern has been to identify bad actors in the mortgage banking industry and to take steps against them.

To keep them updated on what is happening in this sector the Michigan Office of Financial & Insurance Services (OFIS) - Mortgage and Consumer Finance section request activity information from the industry about lenders and brokers. This information is used to identify more risky companies in Michigan and take necessary actions if required.
Posted on: 06th Feb, 2007 04:23 pm
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