How many points over Treasury Securities typically indicate a predatory loan for second mortgages?

A predatory loan is typically characterized by very high-interest rates compared to prevailing market rates, which often leaves borrowers in a difficult financial situation. When evaluating second mortgages, one common measure used to identify potentially predatory lending practices is the difference in interest rates compared to Treasury Securities.

In this context, a difference of 9 points over Treasury Securities is significant enough to raise red flags regarding the potential for predatory lending. This level of disparity suggests that the borrower is paying a much higher interest rate than what is deemed reasonable, aligning with the characteristics of predatory loans, which often exploit borrowers' situations.

Understanding this metric is crucial as it helps borrowers and regulators recognize when a second mortgage could be considered predatory, thereby facilitating better decision-making and promoting responsible lending practices. Recognizing this benchmark can help avoid entering into financially harmful agreements that may lead to defaults or foreclosures.