Predatory Lending Practices and Consequences

The video discusses predatory lending, highlighting practices like steering, packing, and flipping. It explains how lenders exploit borrowers through deceptive tactics, excessive fees, and prepayment penalties, often leading to foreclosure. The video aims to educate viewers on recognizing and avoiding these harmful practices.

What is a common tactic used by predatory lenders to make borrowers accept unaffordable loans?

• Using high-pressure sales tactics

• Offering lower interest rates

• Offering flexible repayment terms

• Providing free financial advice

What does the practice of steering involve?

• Offering borrowers free credit reports

• Directing borrowers to subprime loans despite qualifying for better options

• Encouraging borrowers to save more

• Directing borrowers to the best available loans

How do predatory lenders use the concept of 'packing'?

• By adding unnecessary costs to the loan principal

• By offering discounts on loan fees

• By reducing the loan amount

• By providing free insurance

Why is credit life insurance often more expensive when included in a loan?

• It is not available from other providers

• It is sold as a single premium policy

• It requires proof of insurability

• It is offered at a discounted rate

What is a characteristic of predatory loans regarding interest rates?

• They have rates justified by the borrower's credit score

• They have excessively high rates not justified by risk

• They have lower rates than justified by risk

• They offer fixed rates for all borrowers

How do predatory lenders 'pad' costs?

• By providing free appraisals

• By reducing the loan term

• By charging for unnecessary services

• By offering discounts on fees

What does the practice of 'flipping' involve?

• Refinancing a loan repeatedly without benefit to the borrower

• Offering borrowers a fixed interest rate

• Reducing the loan amount over time

• Providing borrowers with free financial counseling

What is the purpose of prepayment penalties in predatory loans?

• To encourage early loan payoff

• To discourage refinancing to better terms

• To reduce the loan interest rate

• To offer borrowers a repayment holiday

What is a common outcome for borrowers who face prepayment penalties?

• They can easily refinance to lower rates

• They are trapped in high-rate loans

• They receive a refund on their loan fees

• They are offered better loan terms

How do prepayment penalties affect borrowers in the subprime market?

• They allow borrowers to pay off loans early without fees

• They are rarely imposed on subprime borrowers

• They often prevent borrowers from refinancing to more affordable loans

• They offer borrowers a chance to improve their credit score