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Building and Protecting Wealth in Communities |
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Predatory lending strips homeowner equity through illegal and unethical practices such as excessively high fees and commissions, the misrepresentation of mortgage terms and conditions, high interest rates, repeated financing of loans, balloon payments and the financing of high cost credit insurance. In 1999, the North Carolina legislature passed a landmark anti-predatory lending law to protect homeowner wealth. The law limits prepayment penalties, bans loan flipping, and bans single premium credit insurance. It also includes other consumer protections for high-cost loans. A-credit for A-borrowers is CRA-NC’s current focus in predatory lending. Borrowers with good credit may not be able to get prime rates if they walk through a subprime door. Fannie Mae and Freddie Mac estimate that between 20% and 50% of subprime borrowers actually qualify for prime rate loans, meaning that those borrowers are paying more in interest than they should. CRA-NC is currently working with Citigroup to ensure that creditworthy borrowers have equal access to prime rate products across all of Citigroup’s subsidiaries. CRA-NC has estimated that mispricing by Citigroup in 2000 cost borrowers more than $5.7 billion in excess interest payments over the term of a 30-year loan (report).
The 20% of borrowers paying too much in interest will pay $5.7 billion more than they should in interest over the life of the loan. |
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