Rescuing homeowners from predatory loans

The program, available only in Ohio, New York and Arizona, may help some avoid foreclosure.
By CYNTHIA VINARSKY
VINDICATOR BUSINESS WRITER
YOUNGSTOWN -- Lewis Holmes says his job hunt hasn't been going well.
At 82, he thinks age might be the reason.
But Holmes believes he may have to find work or lose his home, a two-story house on Youngstown's South Side that he's been remodeling, mostly by himself, over the past 17 years.
The house was in disrepair and scheduled for demolition when he bought it for $500 in the mid-1980s.
Holmes installed two bathrooms and kitchen cabinets, drywalled and carpeted the living and dining rooms, added a front porch and had aluminum siding installed.
He's proud of his work, and he loves the house, but Holmes said he owes about $41,000 in mortgages and home improvement loans and pays a whopping 25 percent average interest rate. One lender has filed a foreclosure action against him.
The U.S. Steel Corp. retiree admits he never read the fine print on the loan agreements he signed. He replaced several old loans with new ones over the years, he says, but he looked only at the monthly payment, not the interest rate.
"I've been borrowing all my life. I can never get out of borrowing," he said, shaking his head and shuffling through financial papers and bills on his dining room table. "I have some money coming in, but before I get it, I owe it."
Holmes is one of several area homeowners seeking help with home mortgages they can't afford under a consumer rescue loan program sponsored by the National Community Reinvestment Coalition.
About the program: Northeast Ohio Legal Services in Youngstown is a member of the NCRC and is administering the fund locally.
Established in October, the loan program aims to assist low-income homeowners who have been victimized by predatory lenders or are at risk of foreclosure but have made a good-faith effort to pay their bills.
The program doesn't free the homeowners from their debts, said Atty. James Callen, the NOLS executive director.
For those who qualify, the program will pay off old loans and establish a new loan with a lower interest rate, no fees and no points.
"What they get is another loan, but under more favorable conditions," Callen said.
Atty. Cherie H. Howard, managing attorney at NOLS, stressed that the program can benefit only a limited number of homeowners. The rescue loans are available only in Ohio, New York and Arizona, she said, and plans call for issuing a total of up to 200 loans in those three states.
Funds for the loan program will come from a multimillion-dollar fund and underwriting commitment from Household, owner of Household Finance Corporation and Beneficial Finance.
A problem in Valley: Mortgage foreclosure filings are a serious problem among low-income homeowners in the Mahoning Valley, Howard said, and they often result when vulnerable, unsophisticated people fall victim to a predatory lender.
Predatory lending, in general, happens when a lender issues a loan which the borrower clearly cannot afford. The practice takes many forms, from adding unreasonable balloon payments, fees and late charges to falsifying loan applications.
As an example, Howard cited the case of a single mother of three who recently contacted the NOLS for help.
Desperate to find housing for her family, the woman paid more than $50,000 for a house appraised at $26,000. Her 15-year mortgage payment was $477 a month, plus taxes and insurance, more than half her monthly income, and the loan included a $37,000 balloon payment in the 15th year.
In that case, as in most cases the NOLS sees, the buyer was unaware of the balloon payment when she signed the papers, Howard said.
NOLS takes some predatory lending complaints to court, Howard said, but the legal staff must choose carefully because the cases are labor intensive for attorneys, averaging 40 to 50 hours apiece.
The agency provides free legal services for people who meet income guidelines.
"Your heart just bleeds for these people who are losing their homes," she said, "but we have purposely not done outreach because we would be inundated with requests. We don't think we'd be able to meet the demand."
vinarsky@vindy.com