Texas bills target ‘wraparound’ mortgage lending practices

Answering advertisements is one way buyers come in contact with unscrupulous lenders who specialize in a practice known as “predatory wraparound mortgages”.
News Story (Texas)

Bob Sechler
Austin American-Statesman
March 13, 2017

Tags: Consumer Protection, Housing: Mortgage, Predatory Lending

Organizations mentioned/involved: Texas RioGrande Legal Aid (TRLA)


So-called “wrap loans” are legal in Texas. When done legitimately, a home is sold with an existing lien still on it. The buyer uses a wrap lender to take out a second, higher-interest loan that “wraps” around the existing one. The idea is that the wrap lender uses the higher-interest payments from the second loan to pay off both over time.

But under wrap scams, a predatory lender purchases a home with a lien on it from an oftentimes desperate seller but, after reselling the home under a wrap loan, doesn’t use the higher payments to retire the previous debt.