How does the FDIC define predatory lending? What are some examples of predatory lending?

The FDIC portrays a firm stance against predatory lending. A letter issued by the organization to financial institutions “reaffirms the FDIC's position that such activities are inconsistent with safe and sound lending and undermine individual, family and community economic well-being.” The FDIC outlined policies and procedures that are supposed to address most predatory lending issues. The irony of it all is that the FDIC does not have a set definition of predatory lending.

FDIC Predatory Lending Characteristics

Many people link predatory lending and subprime mortgages together. However, according to the FDIC, these two are not synonymous and subprime mortgages do have a legitimate place in the market. This does not mean that they are wholly excluded from the category of predatory lending. Technically,depending upon their terms, a wide range of loans could be predatory. The FDIC, therefore, outlined three elements that individually or collectively can act as signals. These include:

• Making unaffordable loans based on the assets of the borrower rather than on the borrower's ability to repay an obligation
• Inducing a borrower to refinance a loan repeatedly in order to charge high points and fees each time the loan is refinanced ("loan flipping") 
• Engaging in fraud or deception to conceal the true nature of the loan obligation, or ancillary products, from an unsuspecting or unsophisticated borrower."

Legal Assistance

These are only a few of methods that signal predatory practices. If you or someone that you know is facing foreclosure due to this type of unfairness, seek the advice of an experienced foreclosure attorney.