Predatory Lending and Monthly Payment

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  • Topic: Predatory lending, Debt, Loan
  • Pages : 2 (538 words )
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  • Published : November 20, 2012
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This module described various predatory practices by businesses. Using scholarly resources, describe some specific examples of predatory practices.

With housing bubble bursting a few years ago, many say that the current economic problems the United States is currently experiencing can be directly attributed to the housing crisis. Depending on whom you ask the housing crisis can be blamed on people biting off more than they can chew, or predatory lending practices by banks and mortgage companies. This is not a one sized solution fits all answer, both actions contributed to the housing troubles we as a country are currently experiencing.

The housing crisis can be summarized as the over evaluation of house values in the late 90’s and early 2000’s,and shortly there after peoples mortgage debt became larger than the decreasing value of their home come 2006. Sub-prime loans can also be blamed; I will further discuss predatory lending techniques. One type of predatory lending practice that mortgage companies will use is to emphasize the payment. When this happens the lender focuses on a numerical monthly payment that you are able to afford. The down side to this car salesmen like approach, is that the details of the monthly payment can be skewed to hurt you down the road in the future while appearing like a good deal in the near future. Another predatory practice is called ballooned loans. This type of lending gives the borrower a small monthly payment only covering interest. The last payment covers the principal, normally representing a large borrowed figure. “You will have to make one large balloon payment in order to retire the principal of the loan. Most of the time, no one prepares for this payment and basis foreclosure on their home(1).

Should the debtor or borrower bear some responsibility, at least in some instances? Explain why or why not?

Tactics like this leave the borrower at a marked disadvantage, but who should shoulder the burden of...
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