Representing Georgia Homeowners in Predatory Home Mortgage Lending Cases   Tags: georgia_law, property, real_estate  

Predatory home mortgage lending is a pressing social problem that directly impacts consumers who purchase subprime mortgage loans. Subprime lending, in and of itself, is not predatory lending and many subprime lenders are legitimate businesses providing necessary services to individuals with credit histories who can not qualify for prime loans. The most common description of predatory home mortgage lending practices usually refers to a list of abusive contract terms and practices that include: packing of credit insurance, balloon payments, padded fees, rapid refinancing, high rates, high pressure marketing and solicitation, no regard for the consumer's ability to repay the loan and broker kickbacks disguised as yield spread premiums. These abusive terms and behaviors are also described as targeting vulnerable populations, i.e. the elderly, minorities and low-income individuals. In addition, groups that are traditionally underserved by the mainstream lenders, such as Native American living on reservations, are especially vulnerable to predatory lending. Unfortunately, some home owners eventually lose their homes because they are unable to keep up with the excessive payments. In response, advocates are using a variety of statutory and common law claims to achieve justice for homeowners harmed by abusive lending practices.

Frances Finegan is a May 2006 J.D. candidate in the College of Law at Georgia State University in Atlanta, Georgia. Her interest in this topic was influenced by her internship experiences with public interest organizations committed to advocating and representing low-income individuals.

Home ownership is critical to building neighborhood and community stability. Unfortunately, however, foreclosure rates in the United States have almost quadrupled over the past twenty years such that the number of foreclosures has increased by more than 384%. In addition, unscrupulous lending practices are estimated to cost American home owners more than $9.1 billion each year. An analysis by the U.S. Department of Housing and Urban Development (HUD) demonstrated that in 1998 11% of refinance mortgages nationwide were subprime and in low income neighborhoods that percentage rose to 26%. In the very poorest communities where households make only 50% of the median income, subprime refinancing mortgage loans amounted to 44% of the total refinance loans. Additional research indicates that if consumers had had full and accurate information, they would not have signed the loan documents. When settlement is made on a predatory loan, the consumer is the least experienced and least informed but with the greatest amount of risk. Consumers have reported that they neither knew that their loans were secured by their homes nor that they could lose their homes if they were unable to make the loan payments.

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