Predatory lending Essay Example | Topics and Well Written Essays - 500 words

Predatory lending - Essay Exampleose borrowers with little knowledge on money matters particularly those owning expensive assets that can be repossessed in case the borrower fails to fulfill the terms of the loan (Frank 2009). For example, a borrower whitethorn be required to read and sign a lot of documents which would bind him to the loan agreement. As a result of lack of skills and trusting the lender, he may assume that all the details in the documents atomic number 18 correct and thus sign them without interpreting the whole information. As such, the unscrupulous lender may use up advantage of the situation to add more terms on the signed documents so as to turn in more from the borrower. If this happens, the borrower may not have the ability to challenge the discrepancies. If it occurs that the borrower cannot pay the loan, his assets may be seized by the lenders whose main interest would be to sell them at a profit.The recent mortgage debt crises can be attributed to preda tory lending. People with high hopes of owning homes found themselves in a situation which was caused by malpractices of brokers whose intension was to arrive at from the deals (Frank 2009). To achieve their objectives, the brokers issued loans with high interest rates to unsuspecting borrowers who later became unable to pay the loans. In order to qualify for a loan, a person is supposed to have the ability to repay either in cash or in kind. These brokers managed to benefit from the mortgage lending due to the governments sorrow to regulate their activities (Frank 2009). If proper regulation was done, the unfair deals made to the borrowers would have been noted thus avoiding the consequences that arose later which had a negative effect on the economy.The mortgage crises can also be attributed to the fact that mortgage lenders failed to accommodate this policy and went ahead to give loans to people who were not qualified (Luhby 2009). This resulted to bad debts which could only be puzzle out by reacquiring the houses leaving the borrowers without