Under the CSBS Guidance on Subprime Mortgage Loans, which of the following is NOT considered a predatory lending practice?

Under the CSBS Guidance on Subprime Mortgage Loans, which of the following is NOT considered a predatory lending practice?

• A. Basing a loan off the foreclosure value
• B. Refinancing a borrower repeatedly to collect more fees
• C. Charging higher rates to risky buyers
• D. Using fraud or deception to sell the loan

Answer: (C)

Under CSBS Guidance, predatory lending includes actions that exploit borrowers or trap them in unaffordable terms, such as basing a loan on the foreclosure value (relying on collateral value rather than the borrower's ability to repay), refinancing repeatedly to harvest fees (loan flipping), and using fraud or deception to sell the loan. Charging higher rates to borrowers with greater risk, however, is a form of risk-based pricing and is not, by itself, considered predatory as long as it is disclosed, compliant with fair lending laws, and within usury limits. So that practice is not deemed predatory under this guidance.

Under CSBS Guidance, predatory lending includes actions that exploit borrowers or trap them in unaffordable terms, such as basing a loan on the foreclosure value (relying on collateral value rather than the borrower's ability to repay), refinancing repeatedly to harvest fees (loan flipping), and using fraud or deception to sell the loan. Charging higher rates to borrowers with greater risk, however, is a form of risk-based pricing and is not, by itself, considered predatory as long as it is disclosed, compliant with fair lending laws, and within usury limits. So that practice is not deemed predatory under this guidance.