Home equity theft occurs when people are encouraged to borrow money under unreasonable loan terms they don't really understand. These companies target the most vulnerable consumer and present themselves as a friendly alternative to traditional banks. All too often their claims are deceptive and their interest rates and fees are excessive. Unscrupulous lending activities occur disproportionately in minority and low-income neighborhoods, where traditional banking services tend to be scarce. The result is a two-tiered system of home equity lending.
Banks offer equity lines of credit with attractive interest rates and low fees.
Weakly regulated brokers are much more likely to hawk loans with exorbitant interest rates, costly fees and unnecessary insurance. Opponents of pending legislation argue that restrictions on high-cost lending will prevent deserving people from getting loans. This simply isn't true. The truth is, not everyone qualifies for a loan. Sometimes families can't afford to borrow, especially when the interest is high and the loan is packed with fees.