Borrower Beware

By - Jun 1st, 2003 02:52 pm
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By Bethany Sanchez


In the first of this two-part series, last month’s installment on predatory lending described how Mrs. Green, a 72-year old Milwaukee widow got trapped into a high-cost loan offered to her by real estate “professionals” who were engaging in illegal activities. This month, we’ll talk about how to avoid predatory loans and the personal and financial devastation they almost invariably leave in their wake.

The Metropolitan Milwaukee Fair Housing Council (MMFHC) provides an important community resource for people like Mrs. Green — homeowners or potential homeowners who suspect that they may be victims of predatory lenders. Organized and coordinated by MMFHC, Strategies to Prevent Predatory Practices (STOPP) utilizes a coalition of community-based organizations, housing industry representatives and government to identify and eliminate predatory lending practices throughout Milwaukee County.

STOPP is working to identify predatory trends, educate consumers so that they can avoid predatory loans, enforce laws protecting borrowers, support new legislation that would provide additional needed protections and help victims of predatory loans with free advice and new loans that the borrower can afford. The free STOPP hotline (see below) provides coordinated help for the borrower.

You can avoid the predatory lending trap.

How can you avoid a predatory loan? How can you help your mother, friend or neighbor avoid a loan that charges too much and may strip him or her of their home equity and threaten them with foreclosure?

  1. Don’t trust door-to-door or telephone salesmen offering bargains on loans. Beware of promises of fast approvals. Shop around. Research companies with whom you’re considering working. A little extra time invested up front could save your home, and your credit.
  2. Watch out for high interest rates, high fees, and high closing costs. Compare fees and charges.
  3. With the help of a credit or homeowner counselor, find out your credit score, the kind of loan you should be able to qualify for and what payments you can really afford.
  4. Don’t be too quick to put your other bills and debts into a high-cost consolidation loan. It may put your house at risk.
  5. Beware of a lender that pressures you to apply for more than you actually need.
  6. Ask lots of questions if the lender’s appraiser says your house has a surprisingly high value. Find out what similar homes in your neighborhood have sold for in the last six to twelve months. If the loan amount offered exceeds the range, be wary.
  7. Be careful of large balloon payments that may not be right for you. Never gamble that you’ll be able to afford something “later” that’s not within your reach now.
  8. Ask lots of questions about terms and don’t sign any blank document the lender promises to fill out later.
  9. Read all disclosures carefully, making sure you under stand everything you are signing. Get someone to review the documents for you if you still have questions.
  10. Remember that you, the borrower, are in control. You have the power to turn down any loan offer until you get all the facts.

To learn about your credit score and find out about options for loans you can afford, call STOPP partners: Neighborhood Housing Services at 414-344-3013; Housing Resources, Inc. at 414-445-5880; or Select Milwaukee at 414-562-5070.

If you suspect that you, or someone you know, has been taken in by a predatory lender, there is a free, confidential way to get help. Call the STOPP hotline at the Metropolitan Milwaukee Fair Housing Council (MMFHC): 414-278-9190. Hotline staff will help you sort through the terms and conditions in your loan papers. After investigating the loan and discussing options with the client, where appropriate, cases may be referred to cooperating attorneys to prosecute illegal practices, lenders who can refinance the debt into a loan the borrower can afford, and/or credit or housing counseling agencies that can help the borrower make wise credit decisions in the future. STOPP’s help is free. We’re here to help you protect your home.

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