The NewStandard ceased publishing on April 27, 2007.

Anti-poverty Activists Fight to Eradicate Predatory Lending

by Shreema Mehta

Apr. 25, 2007 – In reaction to a surge in home foreclosures, an anti-poverty group is attempting to organize low-income people to push for changes to the nation’s lending laws.

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As the number of people losing their homes to the banking industry continues to climb, the Association of Community Organizations for Reform Now (ACORN) is sending people door-to-door in neighborhoods in dozens of cities in California, Minnesota, Michigan and other states with high foreclosure rates to provide emergency counseling and organize residents.

"We are using the same lists the predatory lenders use to rip off desperate people, to reach out and give people better options and the opportunity to unite and win changes," ACORN National President Maude Hurd said in a statement about the campaign.

As part of ACORN’s campaign, activists are providing information to homeowners about the foreclosure process and options for preventing foreclosure. The group has also set up a toll-free national hotline, (866) 67-ACORN, to field homeowners’ questions about foreclosure or predatory lending.

ACORN is also demanding a one-year moratorium on "predatory loans," which include loans with high fees and interest rates, penalties for making payments ahead of time, or requiring that borrowers solve any disputes through "mandatory arbitration" rather than legal avenues. The group demanded enacting the moratorium in a protest at the National Mortgage Bankers Association last month, according to ACORN’s housing director Jordan Ash.

Last month, almost 150,000 homes were foreclosed, according to RealtyTrac, which sells foreclosed and other types of homes. That marked a 7 percent increase over February foreclosures and 47 percent higher than last year’s March numbers.

The higher foreclosure rates are partly due to an increase in high-interest "subprime" mortgage loans, which carry higher interest rates than the more-standard "prime" loans. Some subprime borrowers also see their interest rates jump dramatically after an initial period, making the loans suddenly unaffordable.

While subprime lenders say the higher rates are to compensate for the higher risk in lending to people with poor credit, the mortgage company Freddie Mac estimated that between 10 to 35 percent of subprime borrowers could have qualified for conventional financing, but were funneled into the subprime market instead.

According to an ACORN analysis of loan data from 2004, high-interest subprime loans have also been disproportionately parceled out to people of color and people living in the South and Midwest.

And a report prepared by the research firm Calvin Bradford & Associates for the Center for Community Change found that while 40 percent of black and 28 percent of Hispanic "middle-income" borrowers received subprime loans, only 14 percent of whites in that category received them.

In addition to pushing Congress members and state attorneys general to crack down on predatory lenders through legislation and investigations, ACORN is calling for an increase in the Department of Housing and Urban Development budget for housing counseling, as well as a "rescue fund" backed by the mortgage industry to help borrowers avoid defaulting on their loans.

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The NewStandard ceased publishing on April 27, 2007.


Shreema Mehta is a staff journalist.

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