By Caroline Monday
WINSTON-SALEM, N.C. — Fighting predatory lending is the focus of a $125,000 grant to Legal Aid of North Carolina by the Z. Smith Reynolds Foundation in Winston-Salem
The grant supports the Mortgage Foreclosure Project at Legal Aid, an effort to save the homes and credit ratings of people targeted with abusive lending practices that Legal Aid says can take cash from their pockets and equity from their homes.
Predatory lending often takes the form of high-cost loans with rates, charges, and yields that are illegal, hidden or not fully explained to the buyer, says Hazel Mack-Hilliard, attorney for Legal Aid of North Carolina and head of the Mortgage Foreclosure Project.
“The result is that often middle- and low-income people are granted loans that they cannot afford, under terms that are too burdensome,” she says. “They ultimately end up not paying and they lose their homes.”
Such loans are often offered by secondary lenders rather than primary lenders such as major banks, she says, and predatory lenders offer to refinance existing mortgages with loans that include balloon payments, variable interest rates, and no measurable benefit to the borrower.
The Center for Responsible Lending, a Durham-based advocacy group, estimates that predatory mortgage lending costs Americans more that $9.1 billion each year.
And while predatory lending is a nationwide problem, North Carolina has an especially vulnerable population, Mack-Hilliard says.
“It is very broad and very rampant,” she says.
Foreclosures in the state grew to more than 40,000 in 2004 from 15,000 a year in the late 90s, she says, and are rising, she says, with much of that growth the result of predatory lending.
“In the late ’90s…the state was experiencing around 15,000 foreclosures a year. By 2004 we were experiencing more than 40,000 and rising. A lot of those are due to the predatory lending.”
The Mortgage Foreclosure Project aims to help those affected by predatory lending by detecting deviations from legal regulations placed on lending and by identifying misrepresentation or fraud on the part of the lenders.
The Reynolds grant has enabled the project to hire additional attorneys to defend foreclosures and spread its reach to more local Legal Aid offices.
“It has allowed us to improve the expertise within Legal Aid and provide the support to our local lawyers in terms of how to do these cases,” Mack-Hilliard says.
Once the project staff takes up a case, Mack-Hilliard says it is able to help more than eight in 10 homeowners avoid foreclosure.
Since its inception in 2004, the project has helped hundreds of families, she says, and saved nearly $7 million in home equity.