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Minnesota Predatory Lending Practices: Loan Servicing

Predatory Mortgage Lending: Loan Servicing

Illegal practices can be found in all stages of the life of a loan: origination, service, and collection. While perhaps most predatory mortgage lending schemes initiate on the front end of the loan, a couple of significant predatory lending practices occur during the life of the loan. A lawyer can help you recover money that you have lost to a predatory mortgage lending scheme.

Daily Interest on Late Payments

Almost all mortgage loans have some grace period when borrowers can pay after the due date without the lenders assessing late fees. Late fees are commonly assessed as fractional percentages of the past due payments. Many lenders assess daily interest calculated on the remaining principal balance. The predatory lending practice is when a lender charges daily interest during the grace period and adds the interest to the principal even if the borrower makes timely payment before the grace period expires.

Force Placed Insurance

Before writing mortgage loans, lenders will require that the borrowers have homeowners insurance. The lender will be named as beneficiary to protect against loss. If a homeowner lets the insurance policy lapse, the lender can purchase an insurance policy on behalf of the borrower. This force placed coverage is usually more expensive and provides less coverage than insurance a homeowner could obtain. The lender will add the premium for the insurance policy to the monthly loan payment.

Predatory lenders operate in one of two usual ways. In the first case, the predatory mortgage lender will force placing insurance when the homeowner already has insurance coverage. The predatory lender may force place insurance regardless even after the homeowner has provided proof of insurance to the lender. In the second case, the predatory lender properly force places insurance, but then it adds excessive premiums to the loan service.

If you believe that you have been the target of predatory lending practices, then please call or e-mail Minnesota attorney Patrick K. Oden for more information and representation. There is help.

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