Close on the heels of the Ameriquest case, where the home mortgage financier was forced to cough up USD 325 million for targeting sub-prime lending, more mortgage companies targeting credit-strapped borrowers are likely to fall in the net.
Sub-prime lending involves lending to customers, who otherwise cannot get loans due to reasons like poor credit history. Sub-prime lending is usually at rates higher than prime rates. Paradoxically, customers who cannot get prime rates are customers who usually cannot afford sub-prime rates. Hence, financiers that have targeted these groups in effect have created more trouble for them. Sub-prime turns predatory at the stage when the customers are unable to make repayments and the predatory-lender acquires the property.
State financial regulators are now working closely to monitor the situation and penalize companies that have been indulging in this practice
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