Borrowers' Rights
By Robert Rafii, Esq. | Legally reviewed by Robert Rafii, Esq. | Last reviewed May 23, 2024
This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw’s team of legal writers and attorneys and in accordance with our editorial standards.
The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area.
Welcome to the Borrowers' Rights section of FindLaw's Real Estate Law Center. When you enter into a real property loan agreement, you have certain rights protecting you, including the right to:
- Shop for the best mortgage loan and lowest monthly payments
- Ask for a good faith estimate of loan charges, prepayment penalties, and origination fees
- Know how much the mortgage broker is getting in fees
- Review all loan documents, waivers, amendments, and fully understand the terms of the loan
Borrowers and aspiring homeowners should always read the fine print. Educating yourself about your rights is vital to avoid mortgage scammers. This way, you can get the best loan for your home-buying needs. This section contains articles explaining:
- Your right to fair housing and lending
- Rights against mortgage discrimination and predatory lending
- More information about loan servicing
Predatory Lending at a Glance
Lenders should operate in good faith when meeting with potential borrowers. But that's not always the case during a home purchase. The unscrupulous acts of some lenders can result in people losing their homes. Sometimes, they even do this with the help of appraisers and home loan mortgage brokers.
Since predatory lenders don't always break the law, borrowers need to understand how predatory lenders operate and how to avoid them. Common actions considered predatory include the following:
- Using false appraisals to sell properties for more than they're worth
- Encouraging borrowers to give false income information
- Knowingly lending more money than the borrower can reasonably afford for homeownership
- Convincing borrowers to refinance their homes repeatedly
- Pressuring borrowers to take out balloon loans and other high-risk loan applications
If you can't make timely repayment, your home could end up in foreclosure. When you miss your mortgage payments, the bank will notify you of default. They could start foreclosure proceedings after a period of time. That means that when a borrower defaults, the foreclosure process allows a lender to:
- Bring about a non-judicial or judicial foreclosure
- Do a foreclosure sale
Common Predatory Lending Tactics
Buying a home is risky and typically has financial repercussions lasting for years. Predatory lenders play into these fears and anxieties. They may try to sneak in unfavorable contract terms or pressure you to do something against your interests. The key to success is to:
- Avoid rushing into a transaction
- Do your research
- Ask plenty of questions
- Always know exactly what you're signing
Predatory lenders may pressure you by telling you they are your only hope for getting a loan. They might warn that your time is running out. While timing can be important, particularly when shopping for a decent interest rate, you should always shop around. Also, you should never agree to sign your name on documents with untrue information or blank sections.
If a lender makes promises too good to be true, watch out. For example, they might suggest that insurance from the Federal Housing Administration unequivocally protects you against loan fraud or home defects. That's false and a big red flag that the mortgage lender isn't working in your best interests.
Your Right to Fair Lending
Some important federal laws that affect many types of loans in all jurisdictions include:
Lenders can't discriminate against borrowers by federal law on the basis of:
- Race, color, nationality
- Religion, gender, sexual orientation
- Marital status, age, receipt of public assistance
- Familial status and disability
For instance, suppose a lender offers less favorable rates to one race over another. Here, the lender may be violating state law and federal law. But it's difficult to determine whether a lender has discriminated against a borrower without comparing applicants in a relatively broad sample size.
Also, remember that lenders sometimes have different lending standards. So, what may look like discrimination at first may just be a legitimate business method discrepancy among different lenders. If you believe someone has violated your rights as a borrower (or prospective borrower), consider contacting one or more of the following:
- State human rights agencies
- Private housing groups
- Real estate attorneys
- Government enforcement agencies, like the Consumer Financial Protection Bureau (CFBP) or the Department of Housing and Urban Development (HUD)
To learn more about your rights as a borrower, click on one of the links below.