City fights predatory lending practices with education, alternatives

Angela Carter , Register Staff 04/07/2004

NEW HAVEN — From Oct. 3 last year through Feb. 27, there were 69 loans foreclosed in the city and another 258 notices of pending legal action involving real property were posted in land records.

This eyebrow-raising trend alerted city officials that so-called predatory lenders, who supply mortgages without regard to a borrower’s ability to pay, were unleashing their practices upon minorities and seniors in New Haven.

Mayor John DeStefano Jr. Tuesday, along with several partner organizations, launched the city’s new "Anti-Predatory Lending Initiative," an awareness campaign to combat abusive lending practices.

Informational literature for the initiative advises borrowers to watch out for the "No credit? No problem!" promises; balloon payments calling for the full balance of the loan after a multi-year term; high interest rates and pre-payment penalties; and excessive service fees "packed" into the loan itself.

Following a morning press conference at City Hall, the New Haven Homeownership Center and ACORN Housing Corp. sponsored the new program’s first workshop on how to detect and avoid predatory lenders.

"These bottom feeders seek to take advantage of families," DeStefano said of lenders who lure struggling homeowners and unsophisticated first-time buyers into loans beyond their means in a rouse to take their homes.

Also involved in the initiative are Fannie Mae, the nation’s largest source of financing for home mortgages, particularly among minorities; the anti-blight Livable City Initiative Bureau; and Empower New Haven.

"You’re going to be saving the economic lives of a lot of people in New Haven," said Robert Levin, Fannie Mae’s executive vice president of housing and community development.

Participating in the anti-predatory lending campaign is part of the national American Dream Commitment, a strategy whereby Fannie Mae will invest $15 billion for affordable homeownership and rental housing in Connecticut over the next five years.

Empower New Haven provided $10,000 to cover outreach and advertising for the initiative. Another $1.6 million is available in Empower New Haven’s Individual Development Account program, which matches, at a 2-1 ratio, dollars potential homebuyers save for down payment and closing costs on homes within the Empowerment Zone. That money is in addition to $500,000 used by non-profit organizations that sponsor credit counseling, asset building and homebuyer education classes, as well as pre- and post-purchase counseling.

For more information, call the Homeownership Center at 777-6925 or Livable City Initiative at 946-8436.

"The hope is that through this process we’ll put these people out of business," President and CEO Althea Marshall said of predatory lenders.

Angela Carter can be reached at 789-5614 or acarter@nhregister.com.

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