Avoid Predictable Mortgage Scams

"Bad credit? No problem!"

Unscrupulous mortgage brokers and lenders use lines like this to aggressively target families and steal their single largest source of wealth-home equity. As families work hard to build wealth through homeownership, abusive loans can quickly sabotage their progress and even push them into foreclosure.

Predatory lending is most common in the subprime market, where home loans cost more and often come with monthly payments that increase over time. Subprime loans result in foreclosure far more frequently than mainstream "prime" loans. To make matters worse, many of the families steered into high-cost subprime loans could qualify for more affordable, less risky financing.

Only a decade ago, the subprime market was a small fraction of the home loan market. At year-end 2005, it had grown into a $665 billion business, representing about 20 percent of all home loans. Policymakers are faced with the challenge of balancing the economic benefits of this growing industry with the need to place appropriate restrictions on unscrupulous lending practices.