Chapter 1
Federal Mortgage Laws and Consumer Protection Regulations
Course: Safe Mlo Prep
Subject: Safe Mlo Prep
Chapter: Ethics
OVERVIEW
Predatory lending involves exploiting borrowers — particularly vulnerable populations such as elderly, minority, and low-income homeowners — through unfair, deceptive, or abusive loan terms and practices. Understanding what constitutes predatory lending is essential both for protecting consumers and for avoiding liability.
- What Is Predatory Lending?
Predatory lending occurs when a lender or MLO:
- Targets vulnerable borrowers with products they cannot afford or do not understand
- Uses deceptive or high-pressure sales tactics
- Structures loan terms that trap the borrower or strip their equity
- Extracts excessive fees or compensation through deceptive means
Predatory lending is not always illegal — some practices exist in gray areas between aggressive sales and outright fraud. However many predatory practices violate TILA, RESPA, ECOA, or state consumer protection laws.
- Common Predatory Lending Practices