A quick guide for avoiding predatory mortgage lending

Unscrupulous mortgage lenders prey on borrowers who don't understand the process of buying and financing, or refinancing their homes. This practice is illegal, but victims of predatory lending may not realize what has happened until their mortgage payments increase unexpectedly or their loans are sent to foreclosure. These tips assist with identifying fraudulent lending practices.

Home buying resources: Learn about mortgages before shopping

• Attend a home buyer education program: These seminars are presented free of charge by state housing finance agencies and HUD approved housing counseling agencies. You'll learn about the mortgage application and approval process, how to select a mortgage, and how to protect yourself from illegal and unethical lending practices.
• Hire a buyer's real estate agent to guide you through the home purchase process: First-time home buyers can feel deluged by the variety of homes available, not to mention mortgage options. Pressure from seller's agents can further cloud your ability to select the home and mortgage best suited to your finances and needs.
• Contact a HUD-approved housing counseling agency: The U.S. Department of Housing and Urban Development supports low-cost housing counseling agencies throughout the U.S. Housing counseling is helpful for determining what mortgages match your needs. You will also learn about the mortgage application, approval and closing processes and identifying predatory lending practices.

Red Flag! Watching out for signs of predatory mortgage lenders

• Beware of lenders stating that they are your "only chance" for getting a mortgage.
• Don't be pushed by anyone toward getting mortgage quotes from only one mortgage lender.
• Shop and compare mortgage rates and APR: The APR, or annual percentage rate, includes lender costs and closing costs in addition to the mortgage rate. Mortgage quotes with very high costs may contain fraudulent or inflated charges. Comparing mortgage quotes line-by-line helps with identifying extra charges. Checking with several lenders helps you understand what costs are customary.
• Pressure and more pressure: Don't be rushed into accepting a mortgage lender or mortgage. Ask questions. If your questions are not answered or are met with claims that you "must act now," find a another mortgage lender.
• Never sign mortgage documents containing blanks: This is a sure sign that something is wrong with your mortgage. Signing blank documents allows lenders to alter information they've provided about the terms of your mortgage, or to file fraudulent financial information on your behalf. Signing fraudulent loan documents, whether or not you're aware it, can lead to criminal prosecution.

Follow your instincts, and remember that you have options for choosing a home and mortgage. If you are suspicious or confused about any aspect of purchasing a home or applying for a mortgage, find another home, real estate agent or mortgage lender.