What are the potential defenses a lender can raise against a predatory lending charge?
State and federal lending laws and regulations are designed to protect borrower’s from lending overreach. In the past few years, however, predatory lending practices have come under fire. Predatory lending includes a number of unlawful practices such as failing to disclose information or inflating interest rates, fees and other loan charges. While most mortgage professionals are honest and hard-working individuals, the fraudulent actions of a select few have led to widespread litigation against lenders.
Predatory Lending Charges
Foreclosure rates are rising in certain regions and as more homes are foreclosed on, an increasing number of borrowers may attempt to raise the defense of predatory lending to save their homes. In particular, borrowers may claim that the loans resulted from unethical lending practices such as fraudulent contract terms, not disclosing mortgage terms, charging excessive fees, or artificially inflating the value of the home. Ultimately, lenders charged with predatory lending face the potential of tremendous financial losses in addition to criminal charges.
Defending against predatory lending charges varies based on the precise actions that have been alleged. In any event, a lender will likely need to submit all paperwork relating to the deal to show that the borrower was informed of all terms of the loan. The loan application will be closely examined as will the lender’s actions in confirming the information contained in the application. The lender’s attorney will also typically seek the testimony of an expert in the field who will closely review the purpose of the loan and verify that the loan officer complied with federal law.
Often, the case will end in these initial stages, provided that the lender is able to confirm that the actions taken with respect to the loan comply with fair lending laws. At other times, however, mortgage loan officers and other responsible parties may face criminal penalties stemming from fraudulent actions. These cases became commonplace during the great recession and continue to persist today. Just last year, for instance, a former JP Morgan Chase bank officer pled guilty to his role in a $33 million mortgage fraud case.
Although the housing market crisis of 2008 is long behind us, the rise in home foreclosures is reason to be concerned. Whether there has been a corollary spike in predatory lending practices remains to be seen, however. In any event, defending mortgage fraud is complex, which makes having the advice and guidance of an experienced attorney crucial.
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