When I meet with clients in Philadelphia who are unsure whether their mortgage is truly “subprime,” I review the original note, any disclosures they received, and their payment history. Together, we look at how the loan was presented, what questions were answered or avoided, and whether the risks were clearly explained. This helps us separate a legitimately higher-risk loan from one that crossed the line into predatory lending. By understanding how your loan was structured and sold to you, we can begin to determine whether you simply accepted tough terms or whether a lender or broker took advantage of your financial situation.
These factors take the following into account:
- The borrower's credit score
- The borrower's down payment amount
- The type of delinquencies found on the borrower's credit report
- The number of late payments found on the borrower's credit report
Following are some of the loans made to borrowers who cannot qualify for a traditional prime loan:
- Non-conforming loans
- Subprime lending
- Near prime lending
- Non-prime lending
- Second-chance lending
Subprime borrowers are limited in their ability to obtain favorable loans due to:
- Size of possible down payment
- History/number of delinquencies
- Type of delinquencies
- Excessive debt
- Lack of assets or security
- Legal orders to pay judgments
- Bankruptcy
Subprime loans essentially have higher interest rates with less favorable terms to compensate the lender against the risk in case the borrower defaults on the loan. The subprime loan is at a higher cost than a prime loan and has less favorable conditions.
What Happens to the Interest Rate?
Many subprime or non-conforming loans start out with low interest rates for the first year. After the first year, the interest rates rise, and that increases the monthly loan payment. Borrowers would refinance into a new subprime loan with additional points and higher interest tacked on. Borrowers who took out adjustable-rate mortgages (ARMs), which gave them lower interest rates at the beginning of the loan, ended up defaulting when the interest rates increased after the designated time period.
When I review a loan for a homeowner in Philadelphia, I look closely at how the interest rate was calculated, what index and margin were used, and how often the rate can adjust. Many people were never walked through these details at closing, so they are shocked when their payment jumps hundreds of dollars in a short period of time. By breaking down the payment schedule and comparing it to what you were told at origination, I can help you understand whether the terms were fairly presented or whether you were steered into a loan that was designed to become unaffordable.
Subprime Lending Market
Brokers are very aggressive in the subprime lending market. Some state the value of a property above its actual value, overstate the borrower's income, increase the interest rate in the loan, or relay false credit score information to lenders. The purpose is to get the loan for the borrower and receive a sizeable commission.
In Pennsylvania, many subprime loans were made during periods of rapidly rising home prices, especially in and around Philadelphia. In that environment, some brokers focused more on getting a deal approved than on matching borrowers with sustainable loans. When I evaluate a case, I consider whether the broker pushed you into a larger loan than you could reasonably afford, or relied on inflated appraisals or stated-income applications that did not reflect your true finances. These details matter because they can form the basis for claims against the broker or lender if you were pushed into default by practices that were misleading or abusive.
If you were the victim of aggressive broker tactics that were fraudulent or deceitful when you obtained a subprime loan, you may have possible recourse against the broker and lender. You should involve your attorney in your legal matter. My Philadelphia foreclosure defense office can review your loan paperwork and advise you on your possible case.
What Are My Consumer Rights?
Lenders in the subprime market often approve loans easily, or they fail to fully explain the actual cost of the loan to the borrower. They also encourage frequent financing to get better interest rates and roll the costs into the new loan, making it harder for the borrower to repay. The lender benefits each time a loan is refinanced, and it costs the borrower dearly. Predatory subprime lending traps uneducated or targeted borrowers into a cycle of debt. In the meantime, the lenders realize large profits from each loan origination.
As a homeowner, you have several important protections that may apply to a subprime mortgage:
- Right to clear disclosures: You are entitled to written information about your interest rate, payment changes, and fees before you agree to the loan.
- Right to accurate application information: Lenders and brokers should not inflate income, assets, or property values to push a loan through.
- Right to fair collection practices: If you fall behind, collectors must follow federal and Pennsylvania rules when contacting you about past-due payments.
- Right to seek legal review: You can ask a lawyer to examine your loan and any foreclosure filings to see whether the terms or procedures were improper.
As a homeowner, you have the right to receive clear disclosures about your interest rate, fees, and payment schedule before you sign. You also have protections under federal and Pennsylvania law against false statements, unfair loan terms, and abusive collection tactics if you fall behind. When I take on a case involving subprime lending or threatened foreclosure in Philadelphia, I examine whether required notices were given, whether you were rushed or pressured at closing, and whether your payments were applied correctly over time. Understanding these rights allows us to identify specific violations and decide whether to raise defenses in a foreclosure case, pursue damages, or both.
How I Approach Subprime Lending and Foreclosure Cases
When someone comes to my office worried about losing a home because of a subprime loan, my first goal is to slow things down and get a complete picture of what happened. I review the loan documents, the payment history, and any letters or court papers you have received. By taking time to understand your finances and the story behind your loan, I can identify whether you are dealing with a temporary hardship, a fundamentally unfair loan, or both. This careful review is the foundation for any strategy we build together.
After I understand how your mortgage was created and how it has been serviced, I look at the status of any foreclosure case in the Philadelphia Court of Common Pleas or other Pennsylvania courts. I consider what deadlines are approaching, what defenses or counterclaims may be available, and whether there are options to modify the loan or resolve the arrears. I then explain these options in plain language so you can decide whether to fight the foreclosure, negotiate with the lender, or pursue other solutions that fit your goals and your family's needs.
Steps to Take If You Suspect Predatory Subprime Lending
If you believe your subprime loan was sold to you using high-pressure or misleading tactics, there are practical steps you can take right away. Start by gathering your closing documents, monthly statements, and any emails or letters from your lender or broker. Having these materials in one place makes it easier to see how your interest rate changed, what fees you were charged, and whether promises made at the closing table match what appeared in writing. This documentation helps turn a vague feeling that something was wrong into specific issues that can be evaluated.
You should also pay close attention to any court notices or sheriff's sale dates received if a foreclosure has been filed in Philadelphia or a surrounding county. Missing a deadline can limit your options, even if the original loan was problematic. Speaking with a lawyer as early as possible allows time to file responses, request information from the lender, and consider defenses that may be available. By taking these steps quickly, you give yourself a better chance to protect your home and hold lenders or brokers accountable for predatory behavior.
If you face foreclosure due to illegal activity on the part of a subprime lender or broker, or you suspect wrongdoing, you should seek legal help from a Philadelphia foreclosure defense attorney experienced in debt collector activities.
Frequently Asked Questions
Can I Stop a Foreclosure If My Loan Was Subprime?
It may be possible to challenge a foreclosure that stems from a subprime loan, but the options depend on your specific facts and the status of the case. Courts in Pennsylvania will look at whether the lender followed required procedures, whether the loan terms were properly disclosed, and whether any unfair practices contributed to the default. Acting quickly gives more room to raise defenses, seek a modification, or pursue other resolutions.
What Documents Should I Bring to a Subprime Lending Consultation?
Bringing as much paperwork as you can will make a consultation more productive. Useful documents include your closing package, any truth-in-lending or disclosure forms, recent mortgage statements, correspondence from your lender or servicer, and any foreclosure complaints or notices from the court. With these materials, a lawyer can more accurately assess your situation and discuss realistic next steps.
Is a Subprime Loan Always Considered Predatory?
Not every subprime loan is illegal or predatory. Some borrowers with past credit problems may only qualify for loans with higher rates or stricter terms, and those loans can still be lawful if they are clearly explained and fairly serviced. Concerns usually arise when important costs are hidden, income is overstated, or borrowers are steered into loans that are designed to fail. Reviewing the details of how your loan was made is the only way to know where it falls on that spectrum.
The Law Office of Michael P. Forbes, PC protects the rights of victims of subprime lending in Pennsylvania. Call today at (610) 991-3321.
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