Fair Lending Rights

Throughout Wisconsin, unfair mortgage lending practices have become common. Many unfair lending practices have become known as “predatory lending.”

Predatory lending is a lending practice in which a lender gets much more out of the loan than the borrower does.

You may be in a predatory loan and not know it until it is too late. The false promise of a predatory loan can ruin your credit and lead to foreclosure. Some predatory lenders target the elderly, people of color, and those with low incomes or damaged credit.

It may be easy to get a home purchase loan, a home equity loan, or a loan to refinance your existing mortgage, but exercise caution – the cost of these loans could be the loss of your home.

Predatory loans often include:

High interest rates and/or high fees
Predatory lenders will often charge extremely high interest rates and fees that are hidden by financing them into the loan. This increases lenders' profit unfairly and makes your loan needlessly expensive. Some predatory lenders charge excessively high fees, charging more than once for the same service – calling them something that sounds different, and then spreading payment for the fees out into the monthly repayments.

Broken promises
Many predatory lenders offer borrowers lower monthly payments, a good interest rate and a loan that meets all of their needs. Borrowers may then find that everything has changed once they get to the closing for the loan. They are then pressured to sign the paperwork, even when they feel uncomfortable about going forward.

Predatory loans may also include:
Adjustable rate mortgages (ARMs) with low introductory rates that adjust into much higher rates, translating into increases of hundreds of dollars in the monthly payments.

Inflated appraisal costs: borrowers are charged a fee for a full appraisal, which should include a detailed report, when only a drive-by appraisal was done.

Deceptive terms and conditions.

Repeated refinancing of the loan, resulting in higher borrower costs.

Concentrated marketing in minority and poor communities.

Bogus broker fees: charging the borrower broker fees when the borrower never met with or knew of the broker.

Requiring credit life insurance: charging exorbitant premiums with little or no benefit from the insurance to the borrower. The lender usually receives a large commission from the insurance company.

Mandatory arbitration clauses: limiting the borrower to a dispute resolution method perceived to be more favorable to the lender than the court system would be.

Negative amortization: a loan in which, after making months or even years of payments, the borrower owes more than the amount originally borrowed. Negative amortization is often associated with interest-only loans, or option ARMs (an adjustable mortgage that gives you the option to pay only interest or to pay on principal as well).

Balloon payments: structuring the loan so that at the end of the loan period the borrower still owes most of the principal borrowed, and is required to pay it back all at once, or refinance.

Predators who claim they help you avoid foreclosure are also multiplying.

The number of small businesses, mortgage brokers and real estate brokers claiming to “help people avoid foreclosure” is on the rise. They will often charge you hundreds or thousands of dollars to do what our nonprofit counselors do for FREE. Many of these operations will take your money up front, and provide you with a less desirable outcome than we could have. Others will take your money and never be seen again.

You have a choice

Remember that you, the borrower, are in control. You have the power to turn down any loan offer until you get all the facts. Beware of promises of fast approvals. Shop around. A little extra time invested up front could save your home, and your credit. Ask lots of questions about terms and don't sign any blank document the lender promises to fill out later. Watch out for high interest rates, high fees and high closing costs. If you have any doubt that the loan you are being offered is right for your circumstances, call our free hotline at (414) 278-9190 for a free, confidential evaluation.

We are here to help!

Call the Fair Housing Council’s predatory lending hotline at (414) 278-9190 to learn about all of your options. The Metropolitan Milwaukee Fair Housing Council operates a Strategies To Overcome Predatory Practices (STOPP) hotline. Please call us if you have any questions about mortgages, refinancing, debt consolidation or home repair loans. The STOPP initiative utilizes a coalition of community-based organizations, housing industry representatives and government to identify and eliminate unfair lending practices. The Fair Housing Council’s STOPP counselors conduct intake, review documents and provide assistance to borrowers seeking loans. These services are also provided to homeowners who may be facing default or foreclosure. Borrowers facing foreclosure receive information on the process, timing of foreclosure, and options for taking action to avoid the loss of their home.

STOPP counselors assess the borrower’s financial condition and coordinate a plan to help the client address that situation: Those who need intensive credit counseling will be referred to partner organizations for help with establishing a budget and cleaning up their credit. Depending on the specific circumstances, STOPP will provide assistance in negotiating with their existing lender or identifying a new lender who can provide an affordable home loan suitable for the borrower’s circumstances, and/or provide assistance pursuing legal options or filing complaints with regulatory agencies.

Borrowers in the greater Milwaukee area borrowers who need assistance with their mortgage loans and/or foreclosure prevention should call (414) 278-9190. Spanish-speaking borrowers needing assistance, and borrowers who live outside of the metropolitan Milwaukee area, should call (414) 847-1816 or (877) 765-4434.

In addition to providing direct assistance to borrowers, Fair Housing Council staff and our partners in the STOPP initiative work to educate people facing default, as well as those considering refinancing or home equity loans. To schedule a presentation on avoiding toxic loans and foreclosure for your group, or for more information about STOPP, contact Bethany Sanchez at (414) 278-1240, extension 22.