I need Info about Predatory Lenders and Can this be right?

Question

I have a Friend who recently Bought a House in a Brand New Subdivision about 2 years ago. She took out a fixed Mortgage and her payments were around $950 and have been up until 9 Monthsago when she was Told her payments were jumping to $1200 a Month because the taxes werent figured correctly. Well She just Received a notice that payment are jumping to $1700 a month (Double her Original Payment! ggrrrrrrr). Again the claim is that the property value was originally figured for the undeveloped land, but nowthe taxes are jumping because the property Value is Much Higher than what they were originally figured at. :-s... So the Question is , Is this Some form of Predatory lending? I know it has to be an Injustice... What recourse can she Take.
She Lives in Texas and I know that many of her neighbors are experiencing the same thing.
Thanks for your help :-)

Answer 1

I'm not sure about the procedure in Texas, but in NJ when a house is newly constructed, at first the real estate taxes are assessed solely on the undeveloped land. Sometime after a Certificate of Occupancy is issued for the new house, the local tax assessor gets around to viewing the house and reassessing the property. Once the property gets reassessed the taxes jump.

If the procedure in Texas is similar, then whoever handled the closing for her should have warned her that she was going to experience a sudden, substantial increase in her monthly payments. In this case it's irresponsibility but not predatory lending.

Answer 2

No, this is not. I have worked in the mortgage business for ten years. When you buy new construction, your first year taxes are based on land only (meaning not land + improvements). Once that year is over, the county will come back and reassess the property and up the taxes accordingly (which the lender SHOULD have told them all along). At my old company, we always collected over what the taxes were going to be (we did a rough estimation) so then when the taxes did go up, there wasn't the payment shock that your friend is experiencing. If we collected over what the new taxes were going to be, the extra money would be refunded at the time that their escrow account was reanalyzed. It's just honestly a case of her going to a lender that didn't know what they were doing. It is not predatory lending, although the lender should have been a little more forthcoming. It is pretty standard to see the taxes go up yearly and the total PITI payment (Principal, Interest, Taxes and Insurance) will go up accordingly. Not much she can do about it, but be aware next time she buys and always ask questions!! Last but not least-tell her to steer clear of brokers and try to deal with one of the bigger banks-Chase, WAMU, Wells, etc. as they generally have a better grasp of what they are doing!

Answer 3

I wouldn't call it predatory lending.

Taxes are something everybody should figure out before they buy property. When real estate is just being developed, the taxes are low... but as those neighborhoods become more established, the taxes go up. It happens to everybody.


I think what they mean by predatory lending, is when a bank gives you an interest-only loan. You pay on it for 10 years, and then they expect you to refinance the entire loan, which makes the payments much higher, or come up with a balloon payment. If you can't afford the higher payments then, you can lose the house. Young people think that in 10 years they will have more money, and they are gambling on that possibility when they take out these interest-only loans. The banks then seize the property and sell it to somebody else. They not only got the property, they got that interest for those 10 years.

Answer 4

The problem right now is that she's in Texas and you've learned about all this from her, while you are a great distance away. Real estate and finance transactions are complex, and you're at an extreme disadvantage trying to figure out what happened in her case, when you don't have any documents in front of you to look at and review. And she probably doesn't know either - she may not be very knowledgable about this kind of finance, so what she tells you is likely to be vague, absent of details and maybe speculation.

If she were my sister or good friend, I would recommend that she gather up all the relevant documents - her original loan agreement plus the correspondance you speak of that continues to raise her monthly payments, and to take all that to a real estate or finance professional for help in understanding it all. A good place to start is by calling the people who caused the rates to rise, and first ask 'why' and how does that work? See if it makes sense at all, even though it's not a desirable condition.

Law enforcement won't help at this point in time, because it has not been determined yet (by your friend) if she just doesn't understand something that's inherently legal, or she doesn't understand something that's illegal. She needs to do some investigating on her own.

If you feel obligated to help her, then maybe she can send you copies - overnight fedex - of what she has, so you can look at it and get your own feel for what it's all about, and who to call and ask questions.

Answer 5

Your friends problem have nothing to do with predatory lending. For predatory lending is CashAdvance, Payday loans and your bank's overdraft charges interest rates from 400 to1300% really.
Texas does not have an income tax , we have property taxes. Yes what her bank is doing is legal. Her bank has some sc--ed up people in mortgage section.
Suggest your friend get 2 more jobs honestly or start packing and ready to down size. Legal recourse is an ice cube chance in Heck.
Been serving more foreclosure notices cause people trust bankers not their own math skills.
Stand by her as a friend she will need it as her payments go up based on taxes.

Answer 6

She needs to contact the state attorney generals office and ask for advice. She can also contact the county clerk of deeds and the Assessors office to inquire as to the property taxes and the value of the property. I would recommend the county route first to get figures on paper then contact the state, or an attorney who specializes in real estate. You can also contact a Real Estate office to inquire as to the value of the property. I would recommend asking the county clerk or the assessor for a real estate appraisor, as they will refer you to one that is legitimate, as many at times will side with the lender.

Then after you have all the figures you need in writing, contact the lender in person, followed up by a letter and then if necessary, contact the state attorney general and provide them a notarized copy of all the paperwork and names involved in your discussions. Make sure they are notarized, as they might not accept them as legal copies. You can get notarizing done at the county court house, usually at the treasurers office.

Good Luck