Many Millville-area residents have lived in their homes for decades. If you have an aging parent, his or her home is likely a valuable asset. Still, predatory lending may rob your father or mother of equity before he or she realizes that there is a problem. Loan predators often target elderly residents with loan flipping. 

Loan flipping occurs when someone induces a homeowner into refinancing a mortgage without any tangible benefit to the homeowner. Fortunately, the New Jersey Home Ownership Security Act of 2002 expressly prohibits loan flipping. While New Jersey law offers some protection for homeowners, it does not specifically define “tangible benefit.” 

The dangers of loan flipping 

There are a variety of reasons an aging individual may want to refinance his or her home. If your parent makes an informed decision and realizes some benefit, refinancing may make good sense. Nonetheless, a predatory lender may charge high interest rates, excessive fees or prepayment penalties. These costs may eat into any financial benefit your mother or father receives from a refinance. Even worse, your relative may end up with a balloon payment that comes due in a shockingly short period of time. 

The problem with New Jersey law 

While New Jersey law provides protections for homeowners, it may also be problematic. To determine whether a loan gives tangible benefit to the borrower, circumstances are relevant. Comparing terms from the new and old loan, economic conditions, noneconomic circumstances, loan costs and loan purposes may give you some idea whether your loved one has realized a tangible benefit from the new loan. 

Protecting your aging relative 

The American Bankers Association provides several recommendations for keeping elderly individuals safe from predatory lenders. If you have an aging parent, you also have a role to play. Routinely informing your mother or father about the dangers of lending schemes may help. Furthermore, you likely want to impress upon your parent the importance of seeking outside help before signing any loan document. 

While New Jersey law prevents loan flipping, the practice can be hard to identify. Still, this type of predatory lending is often catastrophic for elderly homeowners. With a bit of effort and some planning, though, you can likely safeguard your parent’s assets.