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Legal Q&A

Question:

Buyer and seller fully executed a purchase agreement. If, after mutual agreement, they change the purchase price so that seller can pay buyer's closing costs, is that an example of predatory lending?

Answer:

No - so long as the actual agreement of the parties is documented on the purchase agreement. In that situation, the agreement is usually changed by crossing out the first agreed purchase price, writing in a new purchase price that all parties initial and adding an addendum requiring seller to pay buyer's closing costs in the amount of the price increase. If it is handled in that manner, or in any similar manner, so that the true agreement of the parties is reflected in the documentation that is provided to the lender, then it is not predatory lending.

Predatory lending occurs when the parties attempt to manipulate the documents to create the impression that some deal other than the true deal, is happening. If seller is truly paying buyer's closing costs, and if that payment is accurately reflected in the purchase agreement and addenda, then there is not a problem with predatory lending.

12/13/04

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