Predatory lending involves practices that take equity away from the homeowner and can result in the homeowner losing all his or her equity in his or her home. The goal of a predatory lender is to get the homeowner to sign a mortgage so that the lender can eventually foreclose on the home. Predatory lenders do such things as refuse to provide the homeowner with explanations of mortgage terms, pressure the homeowner to sign loan documents right away, and provide false documents to the homeowner.
It is not unusual for a predatory lender to pack a mortgage loan with credit insurance products such as life insurance, which adds more debt to the loan, without disclosing this to the homeowners. Predatory lenders may encourage the borrower to refinance the mortgage loan many times in a short period of time, charging additional points and fees with each refinance. Many predatory lenders will charge the borrower excessive rates and fees even when the borrower can easily qualify for a mortgage with lower rates and fees.