It sounded like a good move. As a single parent of two boys with an almost 26-year track record at her job, Silverton resident Laura Cox thought she knew enough about people to trust the mortgage broker who called her in 2000, offering to wipe out her credit card debt by refinancing her home.
"He kept telling me, 'You're a smart lady,' " Cox says. "I went with it, thinking he knew the best thing for me."
She had no idea that what appeared to be a good financial step was actually the first stumble on a downward spiral that, if nothing changes, could turn Cox into another of the many Hamilton County homeowners who will lose their homes this year because of predatory lending practices.
Easy to get, hard to pay
Southwest Ohio is one of the easiest places in America to lose a home. National foreclosure rates have risen to varying degrees over the past five years, but the number in Hamilton County has jumped at an alarming rate, from 1,084 in 2001 to last year's staggering 2,431 homes sold at sheriff's auctions.
While some of those homes were lost due to their owners' poor money management, many of those facing foreclosure were, like Cox, victims of lending practices that stay within the law but stretch the limits of business ethics.
One needs only look in the nearest mail slot to see that the mortgage industry is booming. Every day brings a pile of postcards and fliers from lenders touting rock-bottom interest rates for new home loans and debt-swallowing refinance loans. Combine this with skyrocketing area home values, and paying down debt with home equity starts to look like a smart way to save money.
But a closer look at the situation reveals an alarming combination of trends. While many traditional lending institutions still maintain high standards for their loan applicants, rising consumer debt and dropping credit scores have created a demand for high-risk nonconforming loans offered by non-traditional mortgage lending companies. These aggressive lenders gladly work to the whims of borrowers, sometimes making loans for more than 120 percent of a home's value.
The pressure to pack more and more debt into these loans is passed on to real estate appraisers, who might be offered four times a typical fee to fraudulently boost a home's value. Some appraisers have the integrity to walk away, but many don't. As a result, many homeowners are finding themselves stuck with homes that aren't worth the money owed on them; one severe illness or layoff could start these homeowners on the road to foreclosure.
After three years of struggling to make the high payments on her loan, Cox learned that her two-bedroom ranch had been appraised for $25,000 more than it was worth. The mortgage lender had sold her loan and refused to take any responsibility for the situation, saying the appraiser was to blame. The appraiser had let his license lapse, essentially disappearing without a trace. Resorting to credit cards and 401k savings to cover her growing debt, Cox contacted the new lender. Their response?
"(They said) this is not their problem, that they bought the loan," she says.
This attitude is commonly encountered by victims of predatory lending, according to Roger Davis, co-chair of Northside-based Citizens Against Loan Sharks.
"Nobody is standing up," he says. "Nobody seems to want to."
The lenders who buy loans on the secondary mortgage market are rarely willing to take responsibility for the effects of loans they did not originally write, and the companies that originate the loans have few responsibilities once the loans are sold.
'I'm going to fight'
While appraisers can be charged with fraud for inflating property values, the appraisal industry relies almost entirely on self-policing measures, few of which have any real impact. Even though victims often discover after the fact that their mortgage contracts contain deceptive and injurious clauses, the responsible parties use the borrowers' signatures on the loans as a trump card to wash their hands of any responsibility.
Davis only promises to work harder.
"The only way we can act on it is to continue to meet and to take it straight to the top," he says.
The group recently began a series of meetings with the president of a major local bank.
"It's still ongoing, but we're able to have some kind of a conversation, talking to them," Davis says. "It's far better than not knowing who to go to and not knowing what to say. It's a slow process, but we're not going to quit."
Citizens Against Loan Sharks also works against predatory lending by educating consumers. By simply providing a place for victims of predatory lending to network, the group helps them realize they're not alone.
"There are so many stories," Davis says. "It keeps coming. As we come together, our members begin to feel a little attached to each other."
The group has assembled a list of tips and resources for others fighting to get out of predatory loans.
"We don't save everybody, but we're willing to listen to everybody's story and give them some of the things that have been working for us," Davis says. "It's growing."
Cox, who joined the group in 2004, agrees.
"It's more than just a support group," she says. "When you feel like all your chips are down, it's good to know that you aren't the only one out there."
Citizens Against Loan Sharks has put her in contact with a volunteer attorney, who is working on a plan to save her house and reclaim part of the $65,000 lost to the loan and related expenses. Cox still has a daunting battle ahead, but she refuses to back down.
"They stole from me and my kids," she says. "It's my house, and I'm going to fight to keep it." ©