Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, March 23, 1994 TAG: 9403230018
SECTION: BUSINESS PAGE: B7 EDITION: METRO
SOURCE: Associated Press
DATELINE: LENGTH: Medium
"I lost my whole life. I lost my husband and I lost my house and had to buy it back," Robins, a Brighton, Mass., widow and school cafeteria worker, told the House Banking consumer subcommittee.
She urged passage of legislation designed to prevent mortgages that amount to schemes to snatch poor and old people's homes. It is sponsored by Rep. Joseph P. Kennedy II, D-Mass., chairman of the subcommittee.
The high-cost mortgages Kennedy is aiming at generally carry interest rates in the upper teens. Often they impose high up-front fees, carry balloon payments and assess a heavy penalty for prepayment.
In a practice called reverse redlining, lenders often target poor and elderly people, who have managed to build up substantial equity in their homes. When the borrowers can't repay, the lenders offer to refinance, earning more fees. Eventually they foreclose.
Kennedy said he would support a series of changes to the bill, which he said were needed to overcome opposition from lenders and get it through Congress. But a consumer advocate pleaded with him to resist the pressure.
"The bill as you introduced it is weak enough," said attorney Kathleen Keest of the National Consumer Law Center in Boston.
She particularly objected to two proposed changes. One would apply many of the protections in the bill only to mortgages whose payments exceeded 50 percent of the borrower's income. Another would exempt open-ended home equity credit lines from the protections.
Lenders have been arguing that unless the legislation is narrowly drawn it will inadvertently restrict the flow of legitimate loans to poor people and others who need them most.
Even after the changes, his version still would go further than a version passed last week by the Senate. For instance, it would specifically prohibit lenders from taking advantage of a borrower's age, lack of financial know-how or physical or mental disabilities.
And both the House and Senate bills would make mainstream lenders who buy up fraudulent mortgages liable for damages, as well as the fly-by-night loan brokerage companies that originate the loan.
In Robins' case, she refinanced 11 times, but her home was auctioned. In 1992 she was able to buy back her home with a mortgage from a legitimate lender. But now she owes $161,000 on what started out in 1983 as a $37,000 home improvement loan.
by CNB