The Law
By: Emily Sachar; Source: AARP Bulletin Date Posted: 2007-03-08 13:23:00-05:00
Four years ago, Isu Sue Miller, 76, thought she had lost the Oahu, Hawaii, home her family had owned for 40 years. Today, it's hers again after a settlement with aggressive lenders who foreclosed on her property when she couldn't meet payments on a $227,000 loan.
"I never asked for any of this," Miller said through AARP attorney Jean Constantine-Davis. Miller's only source of income is her deceased husband's Navy pension and Social Security benefits. When she responded to an advertisement, the California-based lending agency Full Spectrum Lending sold her a loan with a 9 percent interest rate, $23,000 in fees and $1,826 monthly payments—90 percent of her monthly income.
Miller sued, charging that Full Spectrum violated Truth-in-Lending and state consumer protection laws. Davis and attorneys George Zweibel and Andrew Iwashita negotiated a settlement with the firm to reduce the loan and interest rate and return the title to Miller. "I am so grateful to have my family home back," she said.
In a similar case, James Phillips, 55, and his wife, Irene, both disabled and living on Supplemental Security Income benefits of $750 a month, owned their McDowell County, W.Va., home outright. A mortgage broker warned them that they could lose their home if three outstanding car loans weren't paid off.
The couple signed a $28,000 adjustable-rate mortgage based on an inflated property appraisal of $36,000—three times the actual value. It carried a 12.5 percent interest rate that could have risen to 18 percent. They paid $3,000 in fees and for two years made monthly payments. But as interest rates climbed, they fell behind and defaulted. Like Full Spectrum, the lender denied any wrongdoing but agreed to settle.
"These lenders prey upon the vulnerable, the infirm and the desperate," said Constantine-Davis, who with AARP attorney Nina Simon and co-counsel Dan Hedges and Bren Pomponio of Mountain State Justice represented the Phillipses. "But they do so in ways that are so charming and personable that even the most vigilant homeowners could fall for their tactics."
What it means to you:
Predatory lenders prey on the elderly and the infirm and put home ownership at risk. "If you believe refinancing your mortgage is the right move, ask people you trust to recommend someone with integrity who will treat you honestly," says AARP's Simon.
Emily Sachar is a journalist and author based in Brooklyn, N.Y.
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