Elderly Americans are at risk for losing their homes because of predatory mortgage
lending practices. Elderly homeowners constitute a very attractive target for
predatory lenders as nearly 80% of Americans 50 years of age or older own their
own home. After decades of paying down the mortgage, the majority of elders own
their homes free and clear of any liens.
Some elderly homeowners are on fixed or limited income, and need access to credit
to finance home repairs, medical care, property and municipal taxes, and increasingly,
to consolidate credit card debt. For many such homeowners, the equity in their
home is their primary or only financial asset. The value of that asset may have
increased substantially over the past few years as they diligently paid off their
mortgages, and the market price of their homes have increased. It is said that
some elderly homeowners are equity rich, but cash poor.
Predatory lenders often target these homeowners through aggressive solicitation,
and deceptive practices. Home improvement contractors often steer elders to such
high-cost predatory lenders. The contractors, acting as brokers for mortgage companies,
convince elderly homeowners that particular repairs are necessary and that easy
financing can be arranged without disclosing the true cost of the loan. The work
is generally overpriced, and often incomplete or done in an extremely shoddy manner.
Aside from the steering of home improvement contractors, there are several indications
that a loan may be abusive or predatory. Not all loans containing one or more
of the following attributes are predatory loans. However, the terms and features
often associated with such loans include:
Misrepresentation or fraud in the solicitation, marketing or origination
of the loan;
High interest rate, closing costs and fees;
Balloon payments;
Multiple refinancing (also referred to as “flipping”);
Credit insurance (including credit life insurance, credit accident and
health insurance, or involuntary unemployment insurance);
Negative amortization;
Excessive prepayment penalty;
Kickbacks to the mortgage broker;
Making loans the elderly homeowner cannot afford to repay.
The National Consumer Law Center had done extensive advocacy on this issue as
part of our Predatory Mortgage Reform Initiative. In addition to the
manuals for attorneys and advocates listed below, NCLC also publishes for elders,
Consumer Facts for Older Americans, Protect
Your Investment: Don’t Let Predatory Lenders Take Your Home. Elders
may also benefit from reading Consumer Facts for Older Americans, What
You Should Know about Refinancing.
Several manuals published by the National Consumer Law Center as part of the Consumer
Credit Series will be helpful for lawyers and other advocates challenging these
practices.
American Association of Retired Persons (AARP), Consumer Affairs Division, 601
E. Street, N.W., Washington, D.C. 20410, (202) 434-6044 or http://www.aarp.org.
Federal Trade Commission, Office of Consumer/Business Education, 7373 147th St.
N.W. Washington, D.C. 20580. The FTC has several publications on home equity fraud
on its website at www.ftc.gov/bcp/menu-lending.htm
or call 1-877-FTC-HELP.
and NCLC