Lenders exploit poor*s few assets

["Charles Brown" <CharlesB@xxxxxxxxxxxxxxxxxxxxx>]

Lenders exploit poor's few assets
Elderly, minorities often targets
By Gregg Krupa / The Detroit News
hen the window salesman came to the Rev. Levi Williams' door, he brought a lot of smooth talk about the golden rule and personal redemption.

    "This guy came in here, he talked to my wife, and he gave her a hug and a kiss and he buttered her up," said Williams, who lives with his wife on disability income that totals $13,500 annually. "I talked to him, too. And if you'd have heard him, you'd probably buy his stuff yourself."

    The salesman talked Williams and his wife Rita into taking out a new mortgage on their house to finance $14,000 worth of windows. The windows turned out to be schlock, and the second mortgage ― based on a highly inflated appraisal of their house ― was well beyond the Williamses' ability to pay. At one point, Levi and Rita were within a few days of losing their home.

    They are far from alone. Deceived into bartering their homes or savings for the promise of debt consolidation, home improvement or just some spare cash, an increasing number of poor people are victims of predatory lenders.

    Some predatory practices occur at all income levels. But the most devastating impact is on low-income people like the Williamses. Obtaining credit, which is often more expensive for poor people, is now increasingly fraught with peril. It makes the struggle to emerge from poverty even more difficult.

    One advocacy group estimates that the national cost of predatory lending is $9.1 billion annually.      "It's a growing issue of justice and equal opportunity," said U.S. Sen. Debbie Stabenow, one of several members of Congress seeking legislation to protect the poor and other consumers.

    "Most people, especially many of the working poor, have the majority of the savings they've been able to accumulate in their lives in the equity of their homes.

    "Predatory lending is what happens when people are talked out of those sums and into spending money in some way that is not in their best interests."

    Precise measurements of the cost and extent of predatory lending are hard to ascertain. The Federal Reserve Board has issued a call for research to further quantify what it and other agencies, including the U.S. Department of Housing and Urban Development and Treasury Department, describe as a growing levels of predatory lending.

    Analyzing so-called subprime loans across the country, the Coalition for Responsible Lending, which includes groups like the American Association of Retired People and the NAACP, said that 2.7 million families are affected annually at a cost of about $9.1 billion.

    Meanwhile, there is ample evidence that subprime lending ― loans made at higher interest rates to people who are nominally less credit-worthy than so-called prime customers ― has expanded greatly in recent years.

    Observers say the vast majority of predatory lending, which is designed to take people's money, occurs in the subprime field, where many borrowers are the most desperate for credit and know the least about financial transactions. But not all subprime lending is pernicious.

    According to HUD:

    ― The number of subprime refinancing loans increased by 1,000 percent, from less than 79,000 per year to more than 790,000 annually, from 1993 to 1998.

    ― During the same period, subprime loans increased from 3 percent to 26 percent of total loans in poor neighborhoods, from 1 percent to 11 percent in moderate-income neighborhoods and from 1 percent to 7 percent in upper-income neighborhoods.

    ― Subprime loans are 500 percent more likely in black neighborhoods than in white ones.

    A study last year by the Association of Community Organizations for Reform Now (ACORN) established that from 1995 to 1999, subprime loans to blacks increased by 631 percent, by 509 percent to Hispanics and to whites by 285 percent.

    They were easy prey

    When the Williamses were sucked into a scheme two years ago, they had no idea how rampant and sophisticated predatory lending practices had become.

    What Levi Williams says bothers him as much anything was how the salesman "came on all religious."

    "He said, 'I'm saved, filled with the Holy Spirit,' " Williams recalls. "He said, 'By gosh, I used to be on cocaine. I was nothing but plum drunk.' Said, 'God struck me down overnight.' "

    Elderly, financially unsophisticated and concerned that their old house needed some improvements, the Williamses say they now realize they were easy prey.

    Cared for by their children and by people in the neighborhood, including a local pastor and his wife, the Williamses subsist on about $1,100 in monthly Social Security payments.

    Williams says that the house on Griggs Street came to be his at the hand of God. He could never have afforded it, otherwise.

    "The woman who owned it had all kinds of offers from lots of different people around here," he said. "One day, she looked at me, and said, 'God means for me to give it to you.' I paid $8,000 for it. Everyone else offered a whole lot more."



Part 2: Equity in home