Philadelphia Subprime Lending Lawyer
What Is Subprime Lending?
Subprime lending refers to the practice of offering loans to borrowers who have less-than-perfect credit, limited income, or a higher risk of default. While not all subprime loans are abusive or illegal, many have historically been tied to predatory practices, especially in the mortgage industry. For homeowners in Philadelphia, subprime lending played a major role in the housing crisis and continues to affect borrowers who are left with unaffordable loan terms and increased risk of foreclosure. At Louis S. Schwartz, Attorneys at Law (ConsumerLawPA), we help clients understand whether they were placed in a subprime loan unfairly and what options they have for relief.
If you are struggling with a mortgage that seems impossible to keep up with, or if you believe your lender took advantage of your financial situation, it is worth taking a closer look at the terms of your loan.
Understanding subprime loans
Subprime loans are typically offered to borrowers with low credit scores, past financial problems, or limited credit history. These loans carry higher interest rates, larger fees, and less favorable terms than traditional or “prime” loans. Lenders justify the increased costs by claiming they are taking on greater risk, but in many cases, subprime loans are structured in ways that set the borrower up for failure.
Subprime mortgages often include:
- Adjustable interest rates that start low and then increase sharply after a few years
- Balloon payments that require a large sum to be paid at the end of the loan term
- Prepayment penalties that make it difficult or expensive to refinance
- High fees and closing costs rolled into the loan balance
- Short-term “teaser” rates that mask the true cost of the loan
While subprime loans are not inherently illegal, they become problematic when borrowers are misled about the terms or placed into high-risk loans they cannot afford. This is especially true when lenders fail to properly assess a borrower’s ability to repay or rely on inflated appraisals to justify a larger loan.
How subprime lending hurts homeowners
Many homeowners with subprime loans experience a similar pattern. They start with a manageable monthly payment under a low introductory rate. Then, after a few years, the rate adjusts upward—sometimes drastically—increasing the payment beyond what they can reasonably afford. When this happens, borrowers often fall behind, triggering late fees, default, and the risk of foreclosure.
Some borrowers are also pressured into refinancing repeatedly, each time generating new fees and increasing the overall loan balance. This practice, known as “loan flipping,” benefits the lender but leaves the homeowner with more debt and less equity.
In Philadelphia and across the country, subprime lending practices have disproportionately affected low-income communities and communities of color. At ConsumerLawPA, we work to hold lenders accountable when they take advantage of vulnerable borrowers through deceptive or unfair loan structures.
Are subprime loans legal?
Subprime loans are not illegal in and of themselves. However, the way they are marketed, approved, and serviced can lead to legal violations. For example, a lender may violate federal or state law if they:
- Fail to clearly disclose key loan terms
- Approve a loan without properly assessing the borrower’s income and expenses
- Inflate the value of the property to justify a larger loan
- Charge excessive fees or penalties
- Engage in discriminatory lending practices based on race, age, or income
Borrowers have rights under several federal laws, including the Truth in Lending Act (TILA), the Home Ownership and Equity Protection Act (HOEPA), and the Equal Credit Opportunity Act (ECOA). Pennsylvania also protects consumers through its Unfair Trade Practices and Consumer Protection Law, which prohibits deceptive, fraudulent, or unfair business practices.
If your subprime loan was the result of misleading sales tactics, false information, or unlawful conduct, you may have legal grounds to challenge the loan or recover damages.
Subprime lending and foreclosure risk
Because subprime loans carry higher costs and riskier features, they have a higher rate of default and foreclosure. Many borrowers in subprime mortgages end up in foreclosure not because they mismanaged their finances, but because the loan was unaffordable from the beginning. Adjustable rates, balloon payments, and hidden fees all contribute to financial distress.
When foreclosure begins, it is important to act quickly. In many cases, the original terms of the loan may serve as a defense against foreclosure. If the loan was structured unfairly or if the lender failed to follow proper procedures, it may be possible to stop the process or negotiate more favorable terms.
At Louis S. Schwartz, we take a close look at every loan document, disclosure, and communication to determine whether a client was placed in a subprime loan under unlawful or deceptive conditions. Our goal is to help homeowners avoid foreclosure and regain control of their finances.
What to do if you think you have a subprime loan
If you are unsure about the type of mortgage you have or believe the terms were not properly explained, now is the time to seek legal advice. Signs that you may have a subprime loan include:
- A sudden increase in your monthly payment
- Confusion about your loan terms or interest rate
- Difficulty refinancing or paying off the loan early
- High fees or penalties that seem excessive
- Feeling rushed or pressured during the loan process
Our firm offers thorough loan reviews to determine whether you were given a fair mortgage and whether you may be entitled to legal relief. Even if foreclosure has already started, it may not be too late to act.
Let us help you understand your loan and your rights
Subprime lending has harmed countless families and communities, but legal protections exist for those who have been misled or exploited. At ConsumerLawPA, we fight for homeowners in Philadelphia who are dealing with unaffordable or unfair loans.
If you believe you were placed in a subprime mortgage or are now at risk of foreclosure because of it, contact Louis S. Schwartz, Attorneys at Law, for a confidential consultation. We will help you understand your options and take action to protect your home and your future.
