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					                            Predatory Lending
                            Solutions


Predatory Lending Solutions Project
                                   Predatory Lending
                                   Solutions


               Presented to
 Pima County, AZ Community Organizations
             Tucson, Arizona
       Thursday, February 16, 2006
                 By Judy Mott
Montgomery County, OH Community Development
                Beth Deutscher
   HomeOwnership Center of Greater Dayton
                 Jim McCarthy
     Miami Valley Fair Housing Center, Inc.
                           Predatory Lending
                           Solutions




      An Overview of the

Predatory Lending Solutions
      Project (PLS)
    Montgomery County, OH
                                                             Predatory Lending
                                                             Solutions


                Scope of the Problem
•   ―Predatory lending‖ is any unfair credit practice that harms the borrower
    or supports a credit system that promotes inequality and poverty.
    Although predatory lending has become shorthand term for a variety of
    practices that include car title lending, payday lending and check
    cashing businesses, this project is focused on residential real-estate
    transactions that involve financing a home or refinancing home-equity.

•   Predatory mortgage lending and its subsequent foreclosures result in a
    myriad of devastating and extremely costly consequences to our cities.
    Vacant, boarded-up homes lead to neighborhood destabilization,
    increased criminal activity, urban sprawl, declining property values and
    thus an eroding tax base. This dynamic diminishes the local
    government’s capacity to provide basic services, such as education
    and police and fire protection, to its citizens.
                                                             Predatory Lending
                                                             Solutions


         Scope of the Problem (continued)
•   Data consistently shows that the Dayton, OH area ranks in the top
    echelon in the nation for loans made by subprime lenders, with over 20
    percent of all refinances going to subprime lenders. Subprime lenders
    dominated neighborhoods with over a 30 percent minority population
    with 50 to 89 percent share of the market.

•   Consequently, foreclosure research has revealed that in West Dayton,
    which is a historically hyper-segregated, African American community,
    there are four zip codes (45406, 45407 & 45416, 45417), where there
    are at least 25 foreclosures filed per existing 100 households.

•   Ohio ranks first in the nation for the most number of mortgage
    foreclosure filings, per capita. Montgomery County (Dayton) leads the
    State of Ohio with the most mortgage foreclosure filings, per capita, in
    the state.
                                                         Predatory Lending
                                                         Solutions


                History of the Project
•   In 1999, COUNTY CORP, a non-profit housing and economic
    development agency for Montgomery County, noticed a high number of
    refinancing of their low-interest rate loans. Concurrently, Consumer
    Credit Counseling Service, a HUD-approved mortgage default
    counselor for VA/FHA mortgages, noted that within two years,
    mortgage default counseling increased over 500 percent, from one to
    four cases per week to four to five cases per day. In addition, the
    Miami Valley Fair Housing Center and the Legal Aid Society noted an
    increase in calls regarding mortgage default and discrimination.

•   As a result, the Committee Addressing Predatory Lending (CAPL) was
    formed to study the issue and identify a program for addressing
    predatory lending. The development of the Predatory Lending
    Solutions program took approximately two years and implementation
    began in January 2001.
                                                           Predatory Lending
                                                           Solutions


          History of the Project (continued)
•   When the issue of predatory mortgage lending was presented to the
    Montgomery County Board of County Commissioners, they determined
    that a substantial effort was needed to address predatory lending and
    pledged $350,000 of funding per year, over a three-year period to begin
    the project. The Commissioners recognized the long-term need to
    preserve the County’s neighborhoods, damaged as a result of these
    practices.

•   In addition, using Temporary Assistance to Needy Families (TANF)
    funds, the County Commissioners committed an additional $440,000.00
    over a two year period for the development and marketing of a
    massive, community outreach & education media campaign.
                                                                    Predatory Lending
                                                                    Solutions


           History of the Project (continued)
•   Funding for the project has come from a variety of sources, but the core funding
    for the project has been realized primarily by local funds within our county. The
    Board of County Commissioners of Montgomery County have taken the
    extraordinary steps of providing funding for the project from the County General
    Fund utilizing revenue generated by housing bonds.

•   In addition, the Montgomery County Recorder, has contributed funds to the
    project through revenue generated by recordation fees.

•   Montgomery County also has a local affordable housing trust which is funded by
    a special sales tax, and the affordable housing trust, through COUNTY CORP,
    has been a consistent funding source for the project.

•   After the initial launch of the project, we were also successful in receiving Fair
    Housing Initiative Program (FHIP) funds from the U.S. Department of Housing &
    Urban Development (HUD) to support the project.
                                                           Predatory Lending
                                                           Solutions


                       Project Design
•   The Predatory Lending Solutions Project was designed to offer
    prevention and intervention services to Miami Valley families who are
    current or potential victims of predatory lending practices.

•   From the inception, the project has been a collaborative effort by
    multiple different community organizations. To date, participating
    organizations have included: Consumer Credit Counseling Service
    (CCCS) (a division of Lutheran Social Services of Mid-America), Legal
    Aid Society of Dayton, the HomeOwnership Center of Greater Dayton
    and the Miami Valley Fair Housing Center. The Fair Housing Center
    has been the lead organization, coordinating inter-agency relations.
                                            Predatory Lending
                                            Solutions


                Project Design
• The PLS Project’s design includes the following four
  components:

• Community Education & Outreach;

• Intervention & Rescue Services;

• Community Impact Research; and

• Legislative Support
                Predatory Lending
                Solutions




Education & Outreach
    Component
                                             Predatory Lending
                                             Solutions


        Freddie Mac’s “Don’t Borrow
            Trouble” Campaign
• A campaign designed to educate and empower
  consumers

• Began in Boston; has now been launched in over 40
  cities across the country

• Participating organizations have access to seed
  funding, media tool kit, marketing consultant services,
  and on-site training by the National Consumer Law
  Center

• Campaign website: www.dontborrowtrouble.com
                                        Predatory Lending
                                        Solutions


           Neighborhood Walks
• Targeted to zip codes/neighborhoods
  showing a high incidence of predatory lending
  and foreclosure

• Volunteers walk the neighborhood distributing
  consumer awareness materials

• Bright t-shirts & rented bus trolley bring
  attention and safety to the group
                    Predatory Lending
                    Solutions


PLS Neighborhood Walks
                    Predatory Lending
                    Solutions



PLS Neighborhood Walks
                    Predatory Lending
                    Solutions




PLS Neighborhood Walks
                                      Predatory Lending
                                      Solutions


  Outreach Through Existing Programs
           and Partnerships

• Homebuyer classes

• Fair Housing educational programs

• Community presentations

• In-service training opportunities
                                     Predatory Lending
                                     Solutions


    Community Festivals & Events
• Established ―Predatory Lending Education
  Day‖ with press conference & table displays
  at Courthouse Square
• Black Cultural Festival
• Neighborhood events
• Home improvement & other housing related
  conventions/shows
                                            Predatory Lending
                                            Solutions

          Montgomery County, Ohio
           Local Media Campaign
• Established Predatory Lending Solutions Hotline
• Developed brochures, posters, radio, television,
  billboard and bus advertising
• Utilized local advertising company to design
  campaign theme and materials
• Certain marketing initiatives included the PLS Hotline
  phone number; others were intended solely as public
  awareness
             Predatory Lending
             Solutions


Billboards
             Predatory Lending
             Solutions


Billboards
             Predatory Lending
             Solutions


Billboards
                    Predatory Lending
                    Solutions


RTA Bus Externals
                   Predatory Lending
                   Solutions


RTA Bus Placards
                Predatory Lending
                Solutions




Newspaper Ads
                Predatory Lending
                Solutions




Newspaper Ads
                Predatory Lending
                Solutions




Newspaper Ads
           Predatory Lending
           Solutions




Brochure
Predatory Lending
Solutions
Predatory Lending
Solutions
         Predatory Lending
         Solutions

Poster
                                Predatory Lending
                                Solutions

    National Fair Housing Alliance’s
           Media Campaign

• Worked with the Ad Council to develop
  theme and materials

• Television & Radio Commercials

• Written materials
               Predatory Lending
               Solutions




Intervention
Component
                                                               Predatory Lending
                                                               Solutions


            Assessment & Evaluation
•   The essential nexus of this system is the PLS hotline. Two predatory
    lending specialists at the Fair Housing Center staff the hotline and
    make an assessment based upon information obtained from that initial
    contact with the client.

•   If the caller describes characteristics of a predatory loan, the specialist
    will make an appointment with the caller, conduct an interview and
    review the loan documents. If the predatory lending complaint is found
    to be meritorious, the complaint is accepted and an investigation is
    opened. Throughout this entire process, the predatory lending
    specialists work to identify local resources to provide appropriate
    assistance to the client.

•   The predatory lending specialists have also sought and obtained
    private attorneys for those clients who have been victims of predatory
    loans. Further, the specialists have provided vital research and
    analysis for attorneys representing the PLS project’s clients, thus
    facilitating private legal representation for moderate-to-low income
    homeowners who would otherwise be forced to struggle through the
    web of collection and foreclosure un-represented.
                                             Predatory Lending
                                             Solutions


 Negotiation with Offending Lenders
• This is a shared responsibility between the PLS
  Specialists and the staff attorney. When possible,
  negotiations are handled by the specialists to try and
  arrive at terms that benefit the client while at the
  same time are agreeable to the lender.

• When the specialists are unable to successfully
  negotiate a resolution, then negotiations are elevated
  to the staff attorney or referred out to a cooperating
  attorney for additional negotiation and/or litigation.
                                                             Predatory Lending
                                                             Solutions


        Utilization of IOLTA Accounts
•   One of the key components of our success has been the requirement
    that clients utilize the project’s IOLTA account.

•   When the PLS project accepts a client for intervention services, and if
    the client is able to rescind their loan because of a violation of HOEPA
    or TILA, we require the client to make their mortgage payment to the
    Center’s IOLTA account, where their money is held in escrow until the
    matter is resolved. The money saved in escrow can be used by the
    client for downpayment or closing costs on a new refinance that gets
    them out of the predatory loan.

•   In this way we are able to demonstrate to lenders that our clients are
    good credit risks and are willing and able to perform in a loan, which
    facilitates obtaining a better loan for the client at the end of
    negotiation/litigation with the offending lender.
                                       Predatory Lending
                                       Solutions

        Settlements & Conciliation
           On Behalf of Clients

• Both the staff attorney and private, referral
  attorneys work together with PLS staff to
  realize settlements and/or conciliations on
  behalf of clients. The majority of the cases
  that we have brought have been resolved
  through settlement and/or conciliation. This
  is a lengthy process, often lasting 18 – 30
  months.
                                        Predatory Lending
                                        Solutions


     Litigation On Behalf of Clients
• The PLS staff attorney and private
  cooperating attorneys both pursue
  meritorious cases up to and including
  litigation on behalf of clients, when necessary
  in order to obtain relief. The project currently
  has more than 87 active cases, 15 of which
  are currently being litigated by the PLS staff
  attorney, and an additional 27 which are
  being handled by private cooperating
  attorneys.
                                        Predatory Lending
                                        Solutions


           Other Legal Services
• Many of the clients who present to the PLS
  project have multiple legal issues that are
  either part of or resulting from their predatory
  loan. For example, they may need a
  bankruptcy attorney to pursue a bankruptcy
  on their behalf. While the PLS staff attorney
  does not handle the bankruptcy, we do work
  in partnership with the bankruptcy attorney to
  ensure that the client to ensure that the client
  gets the maximum benefit from both the
  private bankruptcy attorney and the project
  itself.
                                                 Predatory Lending
                                                 Solutions


       Financial Literacy Training
One of our key goals is to encourage long-term
  financial success for our clients!

• Financial Fitness Classes
      • 10 hours of training
      • Mix of lecture and group discussion
      • Hands-on exercises
      • Focus on improving money management skills, stability,
        credit, savings and goal planning
                                         Predatory Lending
                                         Solutions


Homeownership & Credit Counseling
• Cash flow analysis: income/expenses

• Credit report review (tri-merge with scores)

• Evaluation of mortgage affordability

• Development of Action Plan to address
  presenting issues
                                    Predatory Lending
                                    Solutions


   Preparing Clients for Refinance
• Assessment of current qualifications

• Analysis of qualifying criteria for PLS
  Refinance Program requirements

• Feedback and coordination of
  application timing with legal staff
                                            Predatory Lending
                                            Solutions


         PLS Refinance Program
• Pilot program with Fannie Mae and participating
  lenders: Fifth Third Bank, Huntington Bank, National
  City Bank & COUNTY CORP Mortgage
• Offers an opportunity to refinance at up to 97% LTV,
  at market rate or slightly above
• Allows more flexible underwriting guidelines,
  acknowledging that PLS clients have experienced
  credit & financial hardship resulting from the
  predatory loan.
• Even with the more flexible guidelines, we must work
  with clients extensively to meet the program
  requirements.
                                              Predatory Lending
                                              Solutions

         Facilitating the Mortgage
    Application Process: Link to Loans
• Once the client is ready for the mortgage application
  process, we provide them with information regarding
  at least three loan options.
• The client voluntarily chooses one, and we send a
  preview of the client’s profile to underwriting & then
  schedule the loan application to occur at our office.
• We provide the lender with standard information such
  as income documentation and bank statements, as
  well as a copy of their training certificate and
  information documenting the predatory nature of the
  loan.
• We stay involved throughout the process, and then
  hold the closing at our office.
                                              Predatory Lending
                                              Solutions

            Local Impact Research
             & Data Maintenance
• Data that needs to be researched include foreclosure
  rates, sub-prime lending activity, and indicators of
  predatory lending
• Data that is readily available includes limited recorder
  system data, real estate tax information, and HMDA
  (but not closing documents, for example)
• On-line access to public information and cooperation
  with database sharing (i.e. recorder, clerk of courts,
  etc.) can be extremely helpful
                                                     Predatory Lending
                                                     Solutions



Local Impact Research – Montgomery County

• A study funded by the Dayton Foundation through the project
  and conducted by the Center for Business and Economic
  Research (CBER) was released by the PLS project in October
  2001, revealed the role of predatory lending in Montgomery
  County. Entitled Predation in the Subprime Lending Market, the
  report concluded that mortgage foreclosure filings in the County
  increased from 1,022 to 2,451 over the period from 1994 to
  2000. In addition, as the volume of loan foreclosure filings
  increased throughout the County, the relative share of filings in
  suburban jurisdictions increased.
                                                                Predatory Lending
                                                                Solutions



Local Impact Research – Montgomery County, OH

•   The study examined a random sample of mortgages associated with
    foreclosure filings and found that a significant minority of subprime
    loans involved in the study exhibited interest rates or other features that
    are predatory in nature. In addition, telephone interviews with over 200
    respondents, involved with loans determined to be predatory in nature,
    concluded that many of the tactics used by predatory lenders at the
    national level are occurring in the subprime market in Montgomery
    County.

•   The study also included an analysis of the data to identify the
    occurrence of subprime lending with predatory characteristics within
    neighborhoods throughout the County. The data was geo-coded by
    census tract.
                                                         Predatory Lending
                                                         Solutions


Local Impact Research – Montgomery County, OH
•   The study found that foreclosures in Montgomery County increased by
    a factor of two and one half times between 1994 and 2000, and that
    subprime lenders were responsible for a disproportionately high share
    of that increase. A substantial number of the subprime foreclosures
    sampled showed signs of predatory lending, including high interest
    rates, pre-payment penalties and balloon payments.

•   Telephone surveys also revealed that many of the tactics associated
    with predatory lending at the national level are occurring in the
    subprime market in Montgomery County. These tactics include new
    fees and different loan terms revealed at only loan closing,
    encouragement to borrow more money, steering prime borrowers into
    inappropriate subprime loans, and inflated appraisals.
                                                          Predatory Lending
                                                          Solutions


Local Impact Research – Montgomery County, OH

•   The study indicated that most of the subprime lenders are doing three
    to four as many loans with African American borrowers, and two to five
    as many loans with borrowers whose household income is 50 percent
    or less of the median household income, when compared with the
    overall market. Mapping of the mortgage foreclosures between 1994
    and 2000 illustrates the rapid spread across every jurisdiction of
    Montgomery County. While the City of Dayton has the largest
    percentage, suburban communities have experienced an increase in
    their share of foreclosures as well as those associated with subprime
    loans.

•   The complete study is available online in downloadable format on the
    Fair Housing Center’s website at www.mvfairhousing.com.
                                                    Predatory Lending
                                                    Solutions


Legislative Education & Advocacy

• Unfortunately, Ohio’s basic consumer protection law exempts
  mortgage lenders thereby creating a legal vacuum, that led a
  former attorney with the National Consumer Law Center to
  describe Ohio as ―ground zero‖ for predatory lending and has
  consequently resulted in one of the highest foreclosure rates in
  the country.

• The project is currently an active member of the Ohio Coalition
  for Responsible Lending, which advocates statewide
  comprehensive legislation to address the epidemic problem of
  predatory lending.
                                                                    Predatory Lending
                                                                    Solutions



Legislative Education & Advocacy

•   Because Ohio is one of only two states in the country to offer lenders a ―safe
    harbor‖ exemption from the most basic consumer protection law, the Consumer
    Sales Practices Act, abusive lenders have been able to ply their trade to
    extraodinary levels throughout the state. The PLS project felt that the legislature
    needed to answer their constituents about why this exemption existed.

•   We developed a ―sound bite‖ to use with the media --

• “Ohioans have more protection when they
  purchase a toaster, than they do when they
  purchase or refinance their home.”
                                                          Predatory Lending
                                                          Solutions



Legislative Education & Advocacy

•   When we took this issue to the Ohio statehouse, the industry was well-
    prepared, and unfortunately, the Ohio legislature adopted a ridiculous
    law that essentially codified existing federal law into state law. In
    addition, the legislature created a ―Predatory Lending Study
    Committee‖ to study the issue and make recommendations for
    additional legislation and/or regulations.

•   So when the state-wide Predatory Lending Study Committee came to
    town for their hearing, the PLS project coordinated a community
    response, ensuring that victims and consumer advocates were in
    attendance at the public hearing to provide testimony and insight into
    the problem in the Dayton area.
                                    Predatory Lending
                                    Solutions

              Project Results to Date
                    By Component

Legislative
Education
&
Advocacy
                                Predatory Lending
                                Solutions

          Project Results to Date
                By Component
Legislative
Education
&
Advocacy
                                                           Predatory Lending
                                                           Solutions



                     Coalition Building
•   The PLS staff continues to make referrals for new and existing clients
    as the project progresses; and we continue to establish relationships
    and coalitions with other agencies involved in the fight against
    predatory lending and evolve existing relationships with:

•   Local government officials & agencies — Montgomery Co. Recorder,
    Auditor, County Prosecutor’s Office, City of Kettering, COUNTY CORP,
    City Wide, Habitat for Humanity, and the Better Business Bureau

•   Individual Realtors® and loan officers

•   State organizations — The Ohio Coalition for Responsible Lending
                                                         Predatory Lending
                                                         Solutions



                   Coalition Building

•   State government agencies — the Dept. of Commerce – Consumer
    Protection Division and the Division of Financial Institutions

•   State politicians — provide information to our elected officials and
    candidates for Ohio offices up for re-election

•   National agencies — the National Consumer Law Center (NCLC),
    AARP, the National Fair Housing Alliance (NFHA), National Community
    Reinvestment Coalition (NCRC), and the National Association of
    Consumer Advocates (NACA)
                                                             Predatory Lending
                                                             Solutions



            Key Findings & Outcomes
Key Finding: Predatory Lending & Fair Housing

•   The Violations of the Fair Housing Act and ECOA may include: 1)
    Targeting African-American, Hispanic or elderly households for
    marketing of higher priced and unequal loan products; 2) Treating
    minorities differently than comparably credit worthy whites in the loan
    application process and/or in the terms of the loan.

•   For example, a subprime lender’s mortgage brokers disproportionately
    steer African-American women to higher-rate loans in order to receive
    kickbacks in the form of a yield-spread premium; 3) Establishing,
    implementing, or maintaining policies and practices that may appear
    neutral on their face but have a disparate impact on protected classes.
                                                               Predatory Lending
                                                               Solutions



            Key Findings & Outcomes
Key Finding: Predatory Lending & Fair Housing

•   The PLS project feels that predatory lending and more broadly, the
    unfair and unequal access to credit and capital, particularly as it relates
    to housing financing, is perhaps the most important civil rights issue in
    an increasingly market-based and global society.
                                                        Predatory Lending
                                                        Solutions




                        Challenges
• Lack of capacity to handle need – staffing, resources, time

• Lack of knowledge, need for training of all staff

• Lack of knowledge, need for training for any new-hire staff

• Lack of adequate remedies, either legal or administrative to
effectively and systemically address the problem

• Lack of sufficient alternate financing options for victims
                                                         Predatory Lending
                                                         Solutions




                        Challenges
• Lack of sustainable funding for a problem that is clearly epidemic
in size and expected to be significant for at least the next 5 – 10 years

• Lack of adequate legislation to address the problem

• Financial industry resistance to additional regulation

• Aged client population, risk of death before resolution of case

• Victims for whom intervention is not successful often end up
homeless
                      Predatory Lending
                      Solutions




For additional information:

www.dontriskyourhome.com
        Predatory Lending
        Solutions




Thank You

				
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