Predatory Lending: The Loan Officer?
| It’s not the loan that’s predatory — it’s the loan officer. When the press gets its teeth in something often times it’s too busy shaking its head to really understand what’s going on. States are all trying to define “predatory” and there’s federal rumblings as well. But what is misunderstood is that the loan itself is not predatory. Lenders have better things to do than design a zero money down loan at a 1 percent start rate and balloon payment in month 13 to someone who can’t afford the payments. Interest Only ARMs and Payment Option ARMs have all been the whipping boy as of late, and it’s because those mean old lenders just can’t wait to foreclose on the Waltons. |
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A loan officer can scour loan files from last year, call up the borrower and suggest they take a cash out loan to pay off credit cards. Some loan officers can look at old loan files and see the borrower has kids almost college-age. “Hey Mr. Borrower, thinking about college? How about some cash out of your home equity?” Perhaps the easiest target is someone who is desperately needing help. They’ve been out of work for a while, or a divorce or some other life-changing experience has fallen upon them. They read some SPAM ad somewhere encouraging them to refinance now to lower payments with an ARM and save their house.
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