Predatory
lending refers to abusive lending practices that generally
take place in the subprime lending market. Subprime
lending refers to the extension of loans or credit to
persons who are considered to be high-risk borrowers.
Persons who comprise the subprime market are considered
to be greater credit risks and do not meet the strict
underwriting standards required to qualify for prime,
or “A” credit. Financing provided to persons
in the subprime market is commonly referred to as “B/C”
or “nonconforming” credit.
Subprime lending, in and of itself, is not a bad thing
and, to the contrary, has allowed many persons the opportunity
to obtain financing and credit when they might have
been denied such by traditional lenders. Subprime lending
is an acceptable practice when it is risk-based lending.
Subprime lending crosses the line and become predatory
lending when it is asset-based lending tied solely to
the equity in a borrower’s home and where the
lending is designed to strip equity from the borrower’s
home.
On July 22, 1999, Governor Jim Hunt signed into law
the North Carolina Predatory Lending law. The primary
components of the legislation are to:
(1) prohibit prepayment penalties for home loans
of $100,000 or less;
(2) prohibit “flipping” where a lender
repeatedly refinances an existing home loan with up-front
fees; and
(3) prohibit financing of single-premium credit insurance.
The prohibitions against prepayment penalties and flipping
went into effect on October 1, 1999 and the remainder
of the predatory lending restrictions became effective
July 1, 2000. Persons victimized by predatory lenders
could be entitled to treble damages (three times the
actual out-of-pocket damages) upon proof of a violation
of the Act.
The North Carolina Predatory Lending Law has served
as a model for numerous other states and communities
battling the problem of predatory lending. It is hoped
that the North Carolina restrictions on predatory lending
will prevent many thousands of homeowners from having
millions of dollars of equity stripped from their homes.
Our lawyers are available for a free consultation to
answer questions about predatory lending and to help
victimized homeowners seek redress against predatory
lenders.
For free answers to your questions about predatory
lending, please call us toll-free or complete this convenient online contact form. |
