Advertisement
YOU ARE HERE: LAT HomeCollections

California

Campaign to Help Buyers Avoid Predatory Lending

July 17, 2001|LEE ROMNEY | TIMES STAFF WRITER

The Los Angeles City Housing Department and Freddie Mac on Monday unveiled a broad campaign to educate vulnerable homeowners and buyers on how to avoid predatory lending practices.

Called "Don't Borrow Trouble," the campaign was launched at the Los Angeles home of an elderly woman who owes more than $150,000 for improvements that officials said were never completed on her house of nearly 50 years.

Federal and city officials and housing activists said the case of that resident--she is mentally impaired and her debt ballooned as her loan was unfavorably refinanced numerous times--is typical of predatory lending.

The campaign will include ads, posters and other outreach efforts in English and Spanish as well as a hotline ([800] 477-5977) and Web sites (http://www.lacity.org/lahd and http://www.dontborrowtrouble.com) to refer victims to legal counseling and other assistance.

It also is being paired with a new affordable-loan program by Los Angeles Neighborhood Services and Wells Fargo Bank to help low-income homeowners refinance high-interest contracts.

Predatory lending practices include originating mortgages when there is no demonstrated ability by the borrower to repay; "packing"--the practice of adding costly and unnecessary unemployment, disability, life or property insurance to a loan; and "flipping"--the practice of repeatedly refinancing a second or third mortgage to generate higher fees for the lenders with no additional benefit for the homeowner.

"Almost every major urban market is being impacted by predatory lending," said Craig Nickerson, vice president of community development lending for Freddie Mac, the second-largest buyer of U.S. mortgages. "We think it's at epidemic proportions, particularly in low-income, elderly and minority communities."

Nickerson stressed that predatory lending does not refer simply to high-interest sub-prime lending, which can offer legitimate benefits to people with nonexistent or damaged credit.

The campaign, which will eventually cover two dozen cities, comes as lawmakers nationwide are taking steps to crack down on predatory practices.

Today, the state Senate Banking Committee will take up a bill, sponsored by Assemblywoman Carole Migden (D-San Francisco), that would prohibit packing and flipping. It also would prohibit making a home equity loan to anyone who is mentally incapacitated.

City Councilman Mark Ridley-Thomas announced Monday his intention to introduce an anti-predatory lending ordinance in council today.

"We know that this is a problem, anecdotally and empirically," he said. "We are obliged to fight it."

Advertisement
Los Angeles Times Articles
|
|
|