Welcome to the Borrowers' Rights section of FindLaw's Real Estate Law Center. When you enter into a loan agreement, you have certain rights protecting you, including the right to shop for the best loan, the right to ask for a good faith estimate of loan charges, and the right to know how much the mortgage broker is receiving in fees. It is vitally important to educate yourself about these rights in order to avoid mortgage scammers and help get the best loan for your needs, which also requires borrowers to read the "fine print." This section contains articles explaining your right to fair housing and lending and other rights against mortgage discrimination and predatory lending.
One would hope that lenders operate in good faith when meeting with potential borrowers, but that is not always the case. In fact, the unscrupulous acts of some lenders (sometimes with the help of appraisers and mortgage brokers) can result in people losing their homes. Since predatory lenders don't always break the law, it's important for borrowers 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 provide false income information
- Knowingly lending more money than the borrower can reasonably afford
- Convincing borrower to repeatedly refinance their homes
- Pressuring borrowers to take out balloon loans and other high-risk loans
Common Predatory Lending Tactics
Buying a home is inherently risky and typically has financial repercussions lasting for years. Predatory lenders play into these fears and anxieties and may attempt to sneak in unfavorable contract terms or pressure you into doing something against your own interests. The key to success is to avoid rushing into a transaction, do your research, ask plenty of questions, and always know exactly what you're signing.
Predatory lenders may try to pressure you by telling you they are your only hope for getting a loan or that your time is running out. While timing can be important, particularly when you're shopping for a decent interest rate, you always want to shop around. Also, you should never agree to sign your name on documents with either untrue information or sections left blank. And if the lender tells you 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 they may not be working in your best interest.
Your Right to Fair Lending
Lenders are prohibited by federal law from discriminating against borrowers on the basis of race, color, nationality, religion, gender, sexual orientation, marital status, age, receipt of public assistance, familial status, or disability. For instance, if a lender offers less-favorable rates to African-Americans whose credit ratings are equal to that of their Caucasian counterparts, then the lender may be violating federal law. But it's really difficult to determine whether a lender has discriminated against a borrower without comparing applicants in a relatively broad sample size.
Also, remember that lenders do not always have the same lending standards. Thus, what may look like discrimination at first may just be a legitimate business method discrepancy among different lenders. If you believe your rights as a borrower (or prospective borrower) have been violated, consider contacting one or more of the following:
- State human rights agencies
- Private housing groups
- Government enforcement agencies, e.g., the Consumer Financial Protection Bureau (CFBP) or the Department of Housing (HUD)
To learn more about your rights as a borrower, click on one of the links below.
Learn About Borrowers' Rights
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