Foreclosure Crisis Spurs Local Initiatives to Prevent Lending Scams in Bedford-Stuyvesant & Neighboring Communities
State Senator Velmanette Montgomery (D-Brooklyn) and her Senate Democratic colleagues unveiled this week a comprehensive plan that responds to New York’s foreclosure crisis which has victimized thousands of borrowers in her Senate District and elsewhere throughout New York. The plan was announced during a press conference at the State Capitol in Albany.
Underscoring the magnitude of unscrupulous lending practices in Brooklyn and in her Senate District in particular, Senator Montgomery noted that between January and March of this year, over 1,110 Brooklyn borrowers received foreclosure notices, and 80 percent of this homeowner population lives in Bedford-Stuyvesant and bordering communities.
The April 2, 1968 edition of The New York Times reported that, “in one case, the owner of a two-family home was paying $339 a month on two mortgages and two other debts against the property. Now, with his debts consolidated into a single mortgage, a lower rate of interest and stretched-out payment period, he will have one monthly bill – $189.”
Forty years later, that homeowner would now be paying twenty times that 1968 bill and therefore, mortgages have had to become more complex and lenders more “creative” in order for the homeowner to make the increased payment.
But it was in the details of that creativity that the devil lurked, ready to pounce and foreclose because of increasing payments and prepayment penalties. According to Clifford Turner, outgoing president of the National Association of Real Estate Broker and voted by Realtist’s magazine as one of the nation’s most thought-provoking real estate professionals, “There are more than 650,000 African-Americans in foreclosure, and $350,000 Hispanics. The numbers are expected to double in the year.”
Outcry from the street level is being heard at community boards and by local officials who meet the statistics face-to-face. Carol David, single mother of two, is one such tale. Carol saw an advertisement in the Daily News from Better Homes. The ad stated the ability to help first time homebuyers achieve their dream, and so she began her journey when she visited the office of Better Homes. Carol was approved for a loan of $699,000.00 with an annual salary of $30,000.00. Less than one year later, she came to NHS of Bedford-Stuyvesant to rescue her from a “bad” loan that should never have been given to her.
With the assistance of NHS of Bedford-Stuyvesant’s new Predatory Lending Assistance Program funded by Carver Community Development Corporation, a subsidiary of Carver Federal Savings Bank, Ms. David is now taking legal action in hopes of saving her home and preserving her dream.
A report released by the Senate Democratic Conference revealed that more than 20 percent of the subprime mortgage loans that originated in 2005 will end in foreclosure, jeopardizing homeownership for more than 28,000 New York families.
According to Richard Trouth, Executive Director of Neighborhood Housing Services (NHS) of Bedford-Stuyvesant, “Predatory lending is a huge problem in Bedford-Stuyvesant; the rate of foreclosure notices in Bedford-Stuyvesant has ranked the highest in New York City since 2002.
NHS steps in every day to educate consumers on how to spot and steer clear of potential scams. And for borrowers who have fallen prey to unscrupulous lending practices, we help them refinance their predatory loans and maintain good financial standing.”
Montgomery is working with NHS to bring information about the risk of predatory lending practices to the community. They are collaborating on this public education campaign with Bridge Street Development Corporation, Bedford-Stuyvesant Restoration, and Brownstoners of Bedford-Stuyvesant, Inc. The coalition plans to hold community forums in churches and other public gathering places throughout the senator’s Brooklyn district.
In addition, Senator Montgomery will sponsor a public hearing in Brooklyn with the NYS Departments of Banking and Insurance as well as the NYS Attorney General. The hearing will be co-sponsored by Senator Martin Connor (D-Brooklyn), Ranking Democrat on the Senate Banking Committee; Senator Jeffrey Klein (D-Bronx), Deputy Minority Leader and Assemblyman Darryl Towns (D-Brooklyn), Chairman of the Assembly Banking Committee.
“By raising public awareness, instituting legal protections and developing counseling services, we can build a significant line of defense against predatory lending practices that are robbing people of their homes and livelihoods,” Montgomery said.
Subprime loans are loans offered to individuals whose credit history prevents them from securing a low-rate loan. A typical sub-prime borrower has a low credit score and a history of late payments, charge-offs or bankruptcies. Since they are considered at high risk of default, they receive less-than-favorable terms, including higher interest rates, regular fees or an upfront charge.
In some cases, subprime borrowers are drawn in by a low introductory rate, which then sharply increases within a few years, making it difficult (if not impossible) to keep up with monthly payments. Unless they can refinance their loan or sell the house, the borrower can lose their home.
The Senator and NHS noted that not all subprime lenders engage in predatory practices, and some subprime lenders provide a valuable service to people who would not otherwise be able to qualify for a mortgage loan.
Alarmed by the growing number of foreclosures across New York State, Montgomery is calling on her constituents and residents statewide to endorse the Senate Democrats’ Predatory Lending Mitigation Program, which is aimed at helping families that have been victimized by predatory lenders.
Montgomery and her colleagues proposed several measures that will protect consumers from predatory lending practices. In an effort to help borrowers who have already been victimized by questionable, and perhaps unethical, lending practices, the lawmakers called for an immediate voluntary six-month moratorium on foreclosures of subprime loans in New York. “I wholeheartedly endorse this idea,” said Trouth of NHS, “and I will encourage our neighborhood banks to participate.” The moratorium is joined by a planned series of statewide public hearings to gain input from victims of predatory lending, the banking industry and housing experts whose testimony will help give shape to policy solutions.
The senator and her colleagues also proposed measures to help consumers avoid the pitfalls of predatory loans, including legislation that would bar the state from doing business with banks that partake in predatory lending practices. In addition, they are introducing a bill to provide training and assistance to loan seekers.
Anyone interested in finding out more about foreclosure prevention and/or the upcoming public hearing and community meetings should call Senator Montgomery’s office at 718-643-6140.