1)Reverse redlining- also known as predatory lending. The lender does not refuse to do business inside the redline area, but instead actively targets member of particular group for predatory lending practices. predatory lending benefits the lender and ignores or hinders the borrower’s ability to repay the debt. These lending tactics often try to take advantage of a borrower’s lack of understanding about loans, terms or finances. In other words they target minorities , the poor, the elderly and the less educated people.

Example of predatory lending: (http://www.dfi.wa.gov/financial-education/information/predatory-lending)

Equity Stripping-The lender makes a loan based upon the equity in your home, whether or not you can make the payments. If you cannot make payments, you could lose your home through foreclosure.

Bait-and-switch schemes-The lender may promise one type of loan or interest rate but without good reason, give you a different one. Sometimes a higher (and unaffordable) interest rate doesn’t kick in until months after you have begun to pay on your loan.

Loan Flipping-A lender refinances your loan with a new long-term, high cost loan. Each time the lender “flips” the existing loan, you must pay points and assorted fees.

Packing-You receive a loan that contains charges for services you did not request or need. “Packing” most often involves making the borrower believe that credit insurance must be purchased and financed into the loan in order to qualify.

Hidden Balloon Payments-You believe that you have applied for a low rate loan requiring low monthly payments only to learn at closing that it is a short-term loan that you will have to refinance within a few years.

Extra Credit, Glossary

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