By Wayne Smith We have all heard of situations where lenders target more-vulnerable borrowers who have significant equity in their home, with the ultimate intention of seizing the property. The borrowers are typically saddled with excessive costs, often clandestinely. The loans are booked based on the equity in a house, not on the income available to repay the loan.
Foreclosure becomes inevitable.
In order to define predatory lending, one must start with an understanding of subprime lending. A credit score can be adversely impacted for reasons such as a history of late payments or previous defaults. Whether fair or unfair, such blemishes represent higher risk to a lender in future borrowing requests. The industry practice of risk-based pricing is nothing new. Therefore, responsible subprime lending represents a way for borrowers to maintain access to credit despite past impairment.