Indianapolis Recorder, Indianapolis, Marion County, 19 July 2002 — Page 8

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THE INDIANAPOLIS RECORDER

FRIDAY, JULY 19,2002

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BAD LOANS Continued from At

appliedit to the taxes due, which put the tionable mental competency who die floor of the Indiana House in the would just make loans on the basis of Washingtons in arrears on their loan, signed the latest in a series of mort- waning days of this year’s session of the borrower’s ability to repay the loan Sandy wrote the bank a letter, offering gages with a pile of fees, an assessment die General Assembly to talk about rather than with the goal of stripping to make arrangements. placing the home’s worth far higher predatory lending in Indiana After he equity from the home, they would be a

The only reply she received were than its actual value, and monthly pay- spoke of the widow in Lebanon, Ind., long way toward complying with any

papers delivered marked Cause Num- ments totaling more than half her in- trying to pay $800a month in mortgage of the proposed'new laws,” Swanson

her 49D07-0203-MF-462, Marion come.‘That are a ton of these cases,” payments on her $811 monthly retire- says.

County Superior Court Bank One had Francis sighs. “And more come sued the Washingtons for foreclosure in each week.”

on their home.

Ilicy just kept handing us more Predatory lending is a tough concept to define, but it turns out the Washingtons’ mortgage practically offers a primer on the characteristics of a predatory loan. Predatory lending is the increasingly widespread practice of signing unsuspecting homebuyers or homeowners for mortgages they can’tafford. One ofthe reasons they can’t afford the mortgages is because they are packed with unfavorable terms the buyers may never be aware

of.

In the Washingtons’ case, they were given a so-called “sub-prime” loan, which has a higher-dtan-market interest rate set to reflecta riskier debtor, even though the Washingtons likely could havequalifiedfor a market rate loan. A

Foreclosing in Marion County The number of Marion County properties sold by the sheriff after foreclosure judgments increased more than 400 percent from 1996 to 2001 as the following

shows:

19%: %1 1997:1308 1998:1930 1999:2750 2000:3483 2001:4086

The

are three DryErase boards set up in the front of Room

ment income, Crawford found that

several other legislators from both par- Soon enough, no one wants

ties shared fire same concerns. to live there

‘All over the state people are talk- As with most weekday mornings, ing about mortpge foreclosures,” he the Washingtons can be found in the says. “And that s a good thing because cramped offices of Organization fora we need to build community aware- New Eastside (ONE), located in a con-

prope r t y that a court has ordered

recent study for toe Cento for Com- to be auctioned off at today’s foreclo-

munity Change in Washington found sure sale,

that African Americans and Latinos The seats in the room are full, and a are more likely to have sub-prime dozen or so people lean their backs mortgages than whites, even if they against the walls. They shuffle papers have similar financial circumstances, arriwaitforthewomanfrcm the Marion

ness of the scope of the problem. Crawford intends to make Indiana’s dubious distinction as the No. 1 foreclosure state an issue in public hearings across die state this summer, and then re-introduce his bill for next year’s General Assembly session. “I’ve heard

rural and suburban legislators, both _ 260 of Republican and Democrat, agree this get drug dealers in the neighborhood, the is a problem, so I don’t think partisan- we all work together to throw them ship will come into this, hesays.‘The out,”Sandysays. They hopetodothe

struggle will be with the mortgage

bankers.”

Indeed, Tom Dinwiddie, a lobbyist with the Indiana Mortgage Banters Association, opposes theCrawford legislation and die pending federal bills. He say s that borrowers would be sufficiently protected by existing laws, including the Indiana Loan Broker Act and a variety of civil and criminal penalties against fraud, if these laws

were vigorously enforced. “The Marion Crawford bill and the federal legisla- higher than the average property value

County tkm deal with disclosure and rate levels hoe.”

and toms and soon, but the problem here is with plain old-fashioned white collar crime, and crooks don’t care about disclosures or rates,” Dinwiddie says. ‘This sort of legislation would simply reduce credit for those who need it Lenders will just abandon the market if they can’t nuke loans at rates

they need for investing.”

Dinwiddie also objects to the very term predatory lending, saying that mortgage fraud problems are caused

e

CityCounty Buildi n g . 4 7 3 squares are drawn on the boards, each indicatinga

verted Dairy Bam on 10th Street They have been coming here faithfully since the group was founded five years ago. Soft-spoken Lawrence Washington is ONE’S newly elected president The group focuses on tasks like getting new sidewalks and extra police patrols and badgering absentee landlords. “If we

same with predatory lenders. ONE director Ken Moran walks to

a fold-out table and spreads out a dozen Polaroid photos of homes on North Keystone, DeQuincey and Drexel. All the homes are in the neighborhood, all are abandoned, and all are in various states of disrepair. ONE says these properties are just a few of288foreclosures in the area due to predatory lending. “Most of the mortgages were for $55-60,000,” Moran says. “Much

Beyond the individual straggles of homeowners like the Washingtons, ONE and other neighborhood groups say predatory lenders are tearing up their communities. Overblown assessments are made, bad loans are issued, and the predictable foreclosures often leave behind abandoned homes. Deserted homes gather more than just weeds and trash. They also become sites for vagrancy, drag dealing and even, down the street from the

Lite many sub-prime loans, the County Civil Sheriff s office to call out by a variety of professions, including Washingtons last summer, the rape of achinatrmc* nrwvtoaoo /witainc a tkanmnortW anrraiuTC “It nrnhlpm not limifpH „ e u

Washingtons’ mortgage contains a the properties. “Number365, the bid is balloon payment A balloon payment for $67,425.40 by Bank One, going is a large final payment, in the once, going twice, going three times. Washingtons’case nearly equal to the Sold to Bank One.” Bank One gets a entire amount they received when the few of these properties, Sullivan Fundloan was signed When the balloon ing and McKenzie Investments get a payment comes due, the Washingtoas few others. Most ofthe bidders are the already will have made 179 monthly original mortgage holders, none appayments, but they mostlyjust covered pear to be the foreclosed homeowners, interest and fees. Under these toms, it Sometimesabiddingcompetition starts,

will be all but impossible for the but not often.

Washingtons to build significant eq- Unless they win their case, the uity in their home. The amount of Washingtons’house is slated be listed lender and closing fees financed into in one of those squares. If it comes to the Washingtons’ loan total a whop- that, they certainly will not lack for ping 12 percent of the loan’s cost, company. The Mortgage Banters Ascompared to 1 percent to 3 percent of a sociation of America reports that Inditraddtional mortgage. Such high fees ana had the highest loan foreclosure are another characteristic of predatory rate of any state—and Puerto Rico—

loans.

Calls seeking comment from the attorney representing Bank One in the foreclosure suit against the Washingtons were not returned. The Washingtons actually entered

during the last quarter of 2001. In ManonCcxinty, the number offeree losure judgments leading to these sheriff sales has increased by more than 400 percent from 1996 to last year. “A lot of people get into a tow

into their current mortgage in an ill- interest rate mortgage, not a fixed rate, fated attempt to escape a previous bad and a year later they find themselves loan, this (me from a division of with a massive house payment,” says CitiBank. That first loan featured some Marion County Sheriff Major Shirley

appraisers. “It is a problem not limited to lenders,” he says. “When a lender invests in a property where an appraiser has valuedital twice the amount it is worth, the lender is the victim.” But David Swanson of ACORN (Association of Community Organizations for Reform Now), which has led straggles against predatory lending in several states, says it is misleading to label the problem as one of fraud and criminal behavior alone. “There are abuses that can be found in loans that are perfectly legal,” Swanson says. “But when those loans have terms like pre-payment penalties, mandatory arbitration and single premium credit insurance, that type of lending should be against the law. Clearly the existing legislaton is insufficient to protect bor-

rowers."

Swanson also refutes the claim that predatory lending restrictions would dry up the market for sub-prime loans. He points to the experience of North Carolina, which in 1999 enacted the nation’s first state anti-predatory lending law. Even after the law took effect, the state continues to be one of the

a 5-year-old girl.

ONE has confronted some of the lenders who hold the mortgages on these empty properties, including a division of CitiBank, the largest bank in the world and the lender on several of these neighborhoodeyesores. Theconfrontations haven ’ t yielded much in the way of results yet, or even a whole lot of attention from the rest of the city, but the neighbors are still badgering the lenders. They feel they have no other choice. “You get a couple of abandoned homes in a block, with the trash and crime that comes from that, and then soon enough no one wants to live there ” Moran says. “Bad lending is what leads to the decline of a neighbor-

hood.”

Silently and simultaneously, Lawrence and Sandy Washington nod

their heads.

Fran Quigley is a contributing editorforNUVO. He also works for anew non-profit organization, Indiana Appleseed, whichhasidentifiedpredatory lending as an area for advocacy. For more information on Indiana

of the few characteristics of a predatory Challis, who oversees these sales, nation’s top 10 states for sub-prime Appleseed,checkwww.appleseeds.net/

loan missing from thdr current mort- Challis says bad lending is the No. 1 lending, and no significant sub-prime in, gage: over-priced single-premium reason forthe increase in foreclosures, lenders have left the market. ‘ Tflenders

credit insurance and an interest rate that followed by a slumping economy ratcheted up soon after they signed the andan accompanying rise in bank-

loan. The Washingtons now admitthey rapteies.

never fully understood the terms of The last number is called. The either mortgage. “We were trying to buyers head out to the elevators to read the papers at the dosing, but they the 11* floor, where they will just kept hiding us more,” says Sandy claim their deeds. Challis’assisWashington. tant, Paula Lundin, balances a 2g

foot high stack of manila folders

Tons of balloon notes as she pulls the door closed to The surface of Cry stal Francis ’ desk Room 260. She’ll also go back to is covered with stacks of the fine-print the 11* floor office and begin the documents the Washingtons signed preparations for next month ’ s sale, for their latest mortgage. Mortgage this time including 481 properPayment Letter, Escrow Waiver Ac- ties. “Sad, isn’t it?’ she asks, knowledgment. Balloon Note, Adden- ‘That type of lending dum to Fixed Rate Note, Mortgage, should be against the Prepayment Rider, Assignment of Jaw’ Mortgage and more, including an eye- Several pending Congres-brow-raising appraisal valuing the sional bills would prohibit predaWashing»on’shomeat$60jOOO.Fnancis tory lending practices. The fedis an artomey with the Senior Law eral PredatoryLendingConsumer Project of Indiana Legal Services, and Protection Act, co-sponsored by she shakes her head as she sifts through Rep. Julia Carson of Indianapolis the stacks of papers. “Part of the prob- would ban balloon payments and lem is that it takes even me quite awhile limit the financing of poirts and to figure all this out and I have three fees to 3 percent of the loan degrees," she says. amount. State Rep. William But she must figure it out quickly, Crawford, also of Indianapolis, because the Washmgtons’reply loBank has introduced a state anti-preda-One’s foreclosure lawsuit is due the toy lending bill which would next day. And, as important as the prohibit single premium credit maoer is to the Washingtons, there is msurance aid would require preno time for Francis to linger on their signing tool cotxndmg for subparticular case. Francis mist get back prime borrowers, to work on cdier cases for other clients. Neither bill has progressed like the 81-year-old woman of que^ very fir, but Crawford did ttAe

Where to turn for help

Attorneys and credit counselors say that many borrowers who enter into predatory loans had other financing options they never explored. If you or someone you know is considering entering into a mortage, you can get advice on whether it is a £air deal for you from the Consumer Credit Counseling Service of Central Indiana, (317) 266-1300, a non-profit community organization that offers credit and home ownership education. Senior citizens considering entering into a loan can contact the Senior Law Project

of Indiana Legal Services, (317) 631-9410. Do you have a claim?

mortgage lenders Household International and its subsidiaries, Household Finance Corp. and Beneficial Corp. The suits accuse the lenders of deliberately misleading borrowers about the terms and conditions of their loans, including high rates and fees, principal

f