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A recent study (2000) by the U.S. Department of Housing and Urban Development (HUD), "Classification of Subprime Lenders," ranked Ohio the fifth highest state in the nation for the number of refinancing loans made by subprime lenders. The Toledo metropolitan area ranked at number 38 overall, having 17.07% of its 18,930 refinancing loans made by subprime lenders. Not surprisingly, a recent Blade article (2002) cites a study by the Mortgage Bankers Association of America that finds Ohio has the second highest foreclosure rate in the nation. It seems predatory lending and rising foreclosure rates go hand in hand.

Each year, millions of consumers are targeted by subprime lending institutions to secure high cost mortgage and/or retail loans. Subprime lenders specialize in offering credit to consumers who may have credit blemishes or consumers with "B" or "C" credit, while conventional lenders focus their marketing efforts on consumers with few or no blemishes or those with "A" credit. With promises of easy payment plans, debt consolidation, and quick approval, predatory lenders lure many consumers who have found it difficult or impossible to access lowcost loans in the conventional market, as well as many unassuming consumers who do, in fact, qualify for traditional loans.

Recent studies by F a n n i e M a e a n d FreddieMac show that as many as 50% of consumers receiving high cost loans in the subprime market qualify for conventional loans.

While subprime lenders serve a need by providing credit to those consumers who may otherwise not have access to it, the Fair Housing Center is finding that, overwhelmingly, African Americans, Hispanics, lowincome persons and the elderly are being targeted by this market-even when they have very good credit and qualify for loans in the conventional market.

Furthermore , some unscrupulous lenders, which the Center refers to as predatory lenders, target vulnerable consumers in order to charge them excessively high rates and rob them of the equity in their homes. Since wealth for the vast majority of Americans is tied to property ownership, this system is threatening to deprive many Americans of their wealth by robbing them of their home's equity and, in many cases, foreclosing on the homes of people who cannot afford the exorbitant interest rates and high points.

Many of the groups targeted by predatory lenders have been excluded by mainstream financial institutions. Additionally, t h e s e unknowing consumers find themselves in these devastating positions due to a lack of financial savvy.

The lending process is very complicated with numerous forms to be completed. Many consumers are ill prepared to deal with the enormous volume of complicated paperwork that is given to them during the loan process. Reports show that consumers do not understand the process or the forms they are completing and rely on financial advisors to guide them through the process.

Most predatory lenders, however, do not provide quality counseling for consumers seeking their products and use the consumer's ignorance as a ripe opportunity to reap huge profits from selling money in this industry. Recent studies show that subprime lenders are far more profitable than their conventional counterparts. For instance, a small analysis of seven national lenders reveals that the earnings-to-loan volume ratio for subprime lenders is substantially higher than that for conventional or prime lenders.

These lenders are extremely profitable due to their often-unscrupulous practices. They charge rates well above prime and charge large points as well. They push mortgage and loan insurance products on consumers that come at hefty premiums. Many times, consumers are paying too much interest for credit they secure, and they are purchasing credit life and disability insurance products for which they have little or no use. Moreover, these loans are often secured with consumers' property, and the Center has received a number of complaints from consumers who are about to lose their homes because they cannot afford the high cost loan they obtained. This problem will only grow as the volume of business and the number of new lenders entering this market expands.

To address this epidemic, the Fair Housing Center, Northwest Ohio Development Agency (NODA), and FannieMae recently announced the launch of a Predatory Lending Remediation Program.

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