Why the Poor Pay More: How to Stop Predatory Lending

Why the Poor Pay More: How to Stop Predatory Lending

Why the Poor Pay More: How to Stop Predatory Lending

Why the Poor Pay More: How to Stop Predatory Lending

Synopsis

"Highlighting community initiatives already underway to combat predatory lending and an extensive listing of practical resources, Why the Poor Pay More outlines active roles that individuals, advocacy groups, financial and legal service providers, and policymakers can play in reversing this destructive trend." Title Summary field provided by Blackwell North America, Inc. All Rights Reserved

Excerpt

Clarence Page

“The faults of the burglar,” the playwright George Bernard Shaw once wrote, “are the qualities of the financier.” Shaw’s assessment, unfair to most major banking, aptly describes the less-scrupulous predators in the socalled subprime market who siphon money out of their unsuspecting customers’ pockets like water through a hose.

Every year thousands of Americans take out home loans in good faith, only to have their faith in the American dream betrayed by practices that can best be called pinstriped loan-sharking. They find themselves paying excessive rates, far above the usual market rate in middle-class neighborhoods. A shortsighted desire for the fees that are generated by the loan moves some lenders to make loans based solely on a home owner’s equity, even when it is obvious that the home owner will not be able to afford the payments.

The higher interest rates charged by lenders in the subprime market are intended to compensate lenders for taking a greater credit risk. But too many borrowers find themselves channeled unfairly into the subprime market. Borrowers with perfect credit can find themselves being charged interest rates three to six points higher than the market rates. No matter how good their credit may be, they are not offered a lower rate by some subprime lenders because there is no lower rate.

Many of those home owners find themselves subject to frequently highpressure solicitations resulting in serial refinancing, a process called flipping. Some of those home owners eventually lose their homes for failure to keep up with the treadmill of excessive payments. Unscrupulous lending practices target the poor and the elderly, but are estimated to cost all Americans billions of dollars a year.

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