Education campaign launched to ward off predatory lending
By Frank Norton
In response to a growing incidence of predatory lending in Miami-Dade County, a $200,000 campaign has been launched to educate potential victims about deceitful sub-prime lending practices before they sign on the dotted line.
Housing Opportunities Project for Excellence, a nonprofit that claims it fights housing discrimination, has so far raised $40,000 for the initiative, The sum represents grants given earlier this year by Coral Gables-based Commercebank and Bank United, which gave $30,000 and $10,000, respectively. Housing Opportunities Project for Excellence organizers say they are counting on much more.
The group plans a first bankers' task force meeting July 30 to discuss further underwriting commitments from local and national banks.
Citibank, which is co-sponsoring that meeting, is expected to sign on for an undisclosed amount. More than 70 banks have been invited to participate in the initiative.
Bill Thompson, director, said the outreach program targets the most preyed-upon demographic groups through radio public service announcements, print media, workshops and a lawyer-staffed hot line.
According to the Center for Community Change, a Washington, DC-based research group, the most solicited borrower profiles are African-Americans, Hispanics and elderly homeowners who are cash poor but equity rich.
A report released in May by the center ranked Miami No. 6 in the nation in the percentage of mortgage refinance loans made by sub-prime companies.
That's not surprising, say local watchdogs, since Miami was recently ranked the poorest large city in the US by the US Census Bureau.
"You have the language issue and the fact that unlike other areas, poor people in Florida often own their own home - there's a lot of equity here," said Allison Bethel, director of civil rights for the State Attorney General's Office.
"Lenders are so aggressive and unscrupulous in their marketing that borrowers don't realize they could get better loan terms," she said.
Reports show creditors use high-pressure sales tactics to convince unwitting homeowners to refinance mortgages or borrow to make necessary repairs. But unseen to the borrower are steep origination and closing fees, harsh early payment penalties and "balloon" term structures that low and fixed income victims can not meet. The creditor eventually forecloses on the house, resells it and moves down the street.
In March, a bill outlawing prepayment penalties, default interest rates and door-to-door sales of mortgages based on home equity rather than income won approval from the Florida Legislature.
Ms. Bethel said the law, crafted by Sen. Kendrick Meek and Rep. Dorothy Bendross-Mindgall of Miami, is too narrow to reign in the majority of predatory practices.
"It focuses on disclosure," she said, "which gives borrowers more paper to read and sign. And that becomes even more confusing."
She and others said the issue is foremost a matter of public awareness, since legislation can't trap the majority of misdeeds.
"It's a difficult animal to pursue with civil rights legislation since lenders can usually prove they are equal opportunity rip-off agents," she said.
This week another, members of a separate initiative lead by Miami-Dade County Commissioner Barbara Carey-Shuler, Housing Opportunities Project for Excellence and several civic organizations are to start monthly meetings to discuss predatory lending and possible education outreach initiatives.
Commissioner Carey-Shuler was not available for comment, but Housing Opportunities Project for Excellence organizers said the agenda includes community updates and plans for getting county funding for awareness media.
Details: (305) 655-3153