Predatory lending is a term more often heard in the US, frequently in connection with predatory lending practices in the student loan industry.  However it can affect seniors even more disastrously.

Predatory lending comes in a number of different forms:

It is the practice of a lender deceptively convincing borrowers to agree to unfair and abusive loan terms, or systematically violating those terms in ways that make it difficult for the borrower to defend against. In addition to predatory mortgage loans, other types of lending sometimes referred to as predatory include payday loans, credit cards or other forms of consumer debt, and overdraft loans, when the interest rates are considered unreasonably high.

Seniors often bear the brunt of such predatory lending practices.  The reason why seniors are put at risk is that they are often the targets of predatory mortgage lending.

A particularly ugly aspect of predatory lending is the high incidence of foreclosure on the homes of senior citizens. While at first glance this might seem particularly egregious simply because senior citizens are more vulnerable, have fewer options for rebuilding after losses, and may be losing what they’ve worked all their lives for, a closer look reveals something even more disturbing.

First, few senior citizens are purchasing their first homes with these adjustable rate or other sub-prime mortgage loans. While younger people may enter into questionable mortgage loans in order to be able to purchase a home they would not otherwise be able to finance, senior citizens are much more likely to be refinancing homes they’ve made payments on for years. That means they’re not only losing long-time homes, but that existing equity is being stripped out of the home by the mortgage lender.

According to Consumer Affairs, senior citizens are disproportionately targeted by predatory lenders, and often convinced to take out loans much larger than they need-in some cases, loans in excess of the equity in the home, or even of its total value. With no remaining equity, any minor setback can leave the homeowner without options.

In Canada, the British Columbia Law Institute has a current project on predatory lending issues in Canada.

Predatory lending is closely tied to the concept of subprime mortgage lending, which is the practice of making loans to borrowers who do not qualify for the best market interest rates. In the United States, the expansion in subprime mortgage lending led to a rise in predatory lending. This project examines whether this pattern could repeat itself in Canada and, if it did, whether our laws would be able to assist victims of predatory lending.

The Canadian Center for Elder Law, which is part of the British Columbia Law Institute, may well eventually have useful outputs on predatory lending as it affects seniors.

It may be expected that predatory lending is having an even more damaging effect now given the general state of the economy.  One hopes that the current laws are sufficiently strong to prevent the worst excesses.

Footnote: If you are interested in books on Mortgages, then why not visit the Mortgages section of the Money Bookstore.

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