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REP. DeGETTE HELPS LAUNCH PROGRAM TO AID VICTIMS OF PREDATORY LENDING
Tuesday August 06, 2002FOR IMMEDIATE RELEASE
August 6, 2002
Contact: Josh Freed
(202) 225-4431
DENVER, CO – Victims of predatory lending – at risk for losing their homes because of loans packed with unfair interest rates, high fees and hidden costs – will now be able to access assistance in the form a new Rescue Mortgage from Fannie Mae.
The Rescue Mortgage product was unveiled on Monday August 5 by U.S. Representative Diana DeGette (D-CO) along with Attorney General Ken Salazar and representatives from Fannie Mae and the Responsible Lending Task Force.
Rep. DeGette urged her constituents to become aware of the risks and prevalence of predatory loans. “I have heard too many sad stories…of good people who are doing their best to hold on to the dream of homeownership, but instead are taken in by cruel lending scams. Rescue Mortgage will allow victims of predatory lenders to obtain fair, market-rate loans to reestablish their financial security.”
Created by a partnership of lenders, nonprofits, local government and industry groups, the Rescue Mortgage product will be offered as part of a $3 million pilot project available to homeowners in the Denver-metro area who have been victims of predatory lending practices. It will include access to affordable mortgage refinancing funds that will allow families to stay in their homes by enabling them to refinance their mortgage loans at lower interest rates.
In addition to providing financial relief, the Rescue Mortgage will require that applicants attend a series of credit counseling classes, as part of an effort to keep them from being twice-victims of lending scams. Speakers at the event emphasized that consumer education is crucial to creating an educated, cautious public that knows how to avoid those who would take their homes and even their savings.
Predatory lenders use a variety of abusive tactics, including sub-prime interest rates, concealed fees, up-front single-premium credit insurance or balloon payments to trap victims into loans they cannot afford. These loans can financially cripple families by leaving them with unaffordable mortgages, which can result in damaged credit ratings, delinquent mortgage payments, foreclosures and bankruptcy.
To avoid such scams, Tony Hernandez, director of the Fannie Mae Colorado Partnership office, said that consumers should never take a loan from someone who directly approaches them with a loan offer. Instead, they should shop around with different banks and lenders, or - even better - take a first-time homebuyer or credit counseling class from a respected housing agency.
Predatory lenders often prey on those with the least access to market-rate mortgages, including recent immigrants, seniors, and members of the Latino and African-American communities. Even as homeownership rates among African-Americans and Latinos rise, so do the number of sub-prime loans made in those communities.
Senior citizens are extremely vulnerable to predatory lenders and often have the most to lose - namely, their homes. Seniors often borrow against the equity in their homes to secure financing for much-needed home repairs and even high hospital bills. This makes them targets for collateral or equity “stripping,” when predatory loans may rely on the liquidation value of the borrower’s home, rather than the borrower’s ability to repay. Loans such as these may be counting on an elderly homeowner’s inability to pay, so that the lender can foreclose on the property or force the homeowner into a bad refinancing scheme.
Representative DeGette emphasized that predatory lending “is a very real and serious threat to the people who live in my district,” particularly single mothers, senior citizens and people of color. These populations are often the most in need of financial assistance, and may not be familiar enough with the features of a predatory loan to avoid a scam.
Initially, the Northeast Denver Housing Center will be the community-based housing organization working with those homeowners who feel they may be candidates for a Rescue Mortgage. People interested in learning more can contact the Northeast Denver Housing Center at (303) 377-3334 or on the Internet at http://www.nedenverhousing.org/.
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