Predatory lending on the rise in West Houston!

Travel back in time with me to 2008: bad loans on homes were the underlying cause of the historic market crash.  Loans with terrible terms were given to homeowners without much research on whether or not the borrower actually had the ability to repay the debt.  Nationwide calls for mortgage industry reform were made, and new laws and regulations were put into place.

For most of the 2010s, we enjoyed a relatively quiet period in the lending industry: rates bumped between 3.5-4.5%, and buyers felt reasonably confident they were getting good deals on loans.  But as we sit here today in 2026 with rates still near 7.5%, bad behavior in the mortgage industry is starting to emerge.  Lenders need to get their business from somewhere, and if they aren't getting it from transaction-based business, they're targeting existing homeowners with refinancing offers.

Refinancing can be an EXCELLENT choice for anyone looking to either (a) lower their monthly payment or (b) pull cash out of their home, but it can also be dangerous.  The last thing I want is for a client to give up a fair mortgage in favor of something with garbage terms, just to get temporary relief on their monthly payment.

What we are starting to see is lenders offering adjustable rate mortgages (ARMs) to existing clients with fixed rate loans.  Imagine you get marketing material from your mortgage loan servicer.  It says, "want to lower your rate from 5.75% to 5.125%?"  Well sure, that sounds good, but you have to remember that the bank ALWAYS WINS.  Adjustable rate mortgages aren't inherently bad, especially after the regulation that was put in place in the wake of the 2008 financial crisis.  If you're worried you're getting scammed by a predatory lender, here are the areas to watch out for:

• Loan terms that adjust after a short period of time - a fair ARM should have AT LEAST a 5-year fixed period

• ARMs that are allowed to adjust every 6 months

• ARMs that don't cap rate increases by 1% in a 12-month period

• Loan origination charges that exceed about 1% of the loan value

• Lenders that roll all of your closing costs into your new loan amount

Want to know more? Watch our video on YouTube!

https://youtu.be/1ljVtdSO17Y?si=yofCc2zhuWVH7pdC

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As your trusted real estate resource in Katy, I'm here to help you find your dream home. Thinking about making the move? Contact me today!
Call or text: ?(281) 235-0390
Email: carolyn.b@compass.com
Website: www.homeswithcarolyn.com 

Carolyn Bauerschlag
Broker Associate, CPA
Brokered by Compass RE Texas LLC