|
An elderly woman, sick
and unable to walk because of a recent leg amputation, faces losing the
home she has lived in for over 30 years. Why? She just wanted to take care
of some badly needed repairs, but she took out a home improvement loan
with an unscrupulous lender. What she ended up with was shoddy repairs, a
loan she couldn’t pay back, and foreclosure of her home by the same
friendly people who offered her the loan.
An elderly
African-American widower stopped eating or taking care of himself because,
he said, he’d never be able to repay the $86,000 home loan an unethical
lender steered him into on his limited income. Instead of living his older
years relaxing, he suffered a stroke and died before anyone could help him
with his troubles.
These people were
victims of predatory lenders. And they are not alone. In the last issue
of Insight, we defined predatory lending as abusive lending terms
and practices by lenders, home improvement contractors, brokers, and real
estate agents. It occurs in many types of loans but predatory home loans
have the most devastating effects. In this article, we will focus on how
it affects our area-—and what Buffalo is doing to fight back.
In a typical
predatory loan situation, an unethical mortgage lender makes a high-cost,
unaffordable loan to a borrower, using the borrower’s home as collateral.
If the borrower cannot repay the loan, the lender forecloses on the
borrowers home and sells the home in a foreclosure sale.
Foreclosures
are not only devastating to individuals, but to neighborhoods. Often in
the Buffalo area, a bad lender will stop just short of foreclosing on a
defaulting borrower. The house may then end up in legal limbo for a time
because either the homeowner or the lender doesn’t pay taxes resulting in
tax foreclosure. Eventually the City becomes the owner through the tax
foreclosure process and if the property cannot be sold at auction, the
City will often demolish it. As you may have noticed in some of our
Buffalo neighborhoods, this sad process has contributed to entire streets
being devoid of homes—making a community look more like a ghost town than
a neighborhood.
Are predatory
lenders coming to your neighborhood? They may be. The Western New York
area is particularly vulnerable to home loan scams for several reasons.
First, because housing is relatively cheap here as compared to other urban
areas, many low and moderate-income families can afford to purchase a
home. According to the 1990 Census, there are approximately 35,000
families at or below 150% of the federal poverty level who own homes in
the Buffalo-Niagara metropolitan area.
In addition,
the Buffalo area has a high number of senior citizens that are homeowners.
There are over 80,000 senior citizens that own their own homes in the
Buffalo-Niagara region; 20,000 of them fall at or below 150% of the
federal poverty level.
What is even
more disturbing is that according to data compiled by the Neighborhood
Economic Development Advocacy Project of New York City, most refinance
loans made in low-to-moderate- income census tracts in the Buffalo-Niagara
region in 1999 and 2000 were sub-prime loans. That means that poorer
families are paying more for loans/credit than middle class families.
Unethical
lenders, particularly in the Western New York area, are making refinance,
home equity, or home improvement loans not based on the borrower’s home
equity but by over-appraising the value of the borrower’s home. By
appraising a home at 150% or 200% of the home’s true value, lenders are
able to refinance the home-purchase loan and then roll the homeowner’s
other debt—and a hefty fee-- into the second loan.
What can be
done to about this problem? The Erie County Fair Housing Partnership’s
Task Force on Predatory Lending has been conducting trainings and seminars
for community development officials, housing counselors, and attorneys.
The last seminar, held in April, dealt with the issue of over-appraisals.
On April 12,
the City of Buffalo launched its “Don’t Borrow Trouble” Campaign and
unveiled a three-point plan to eradicate predatory lending in our area:
·
Educating consumers about good
vs. bad credit;
·
Training housing counselors,
community development officials, and attorneys to recognize "predatory"
and illegal loans; and
·
Offering housing counseling,
credit counseling and legal assistance to homeowners facing foreclosure
because of predatory lending.
The Buffalo
Urban League in partnership with Consumer Credit Counseling is
spearheading the campaign. They are assisted by Freddie Mac, the City of
Buffalo, the County of Erie, and area financial institutions,
not-for-profit legal and housing agencies, law firms, and community
officials.
Over 80 people
attended the kickoff including Mayor Anthony Masiello, Deputy Speaker
Arthur Eve, and representatives from Freddie Mac and local community based
organizations. It was the formal announcement for the beginning of a
public service announcement campaign and for the availability of the Don’t
Borrow Trouble Project hotline.
Counselors for
the project are now available to provide information about mortgages,
refinancing, handling debt, and credit repair. The Project also offers
legal assistance to low- to moderate- income homeowners who are facing
foreclosure because they have been taken advantage of by a predatory
lender.
The Buffalo
"Don't Borrow Trouble Campaign" is one of the most comprehensive and
aggressive anti-predatory lending projects in the country. As predatory
lenders begin to feel the pain of dealing with more educated consumers,
lawsuits, and bad publicity, they will decide that Western New York is
closed to their business.
If you would
like to get involved, please contact the hotline number. Together, we can
drive predatory lenders from our area and keep our neighborhoods safe. To
reach the Don’t Borrow Trouble Project Hotline, call toll free at
1-866-375-0408 or (716) 854-7625.
Maureen Flynn, Esq.
is a consultant with the Buffalo Urban League on the Don’t Borrow Trouble
Project. |
