Mortgage Fraud and Predatory Lending

Anyone reading the papers knows that foreclosures are at record levels nationally and in our city.  Experts report that foreclosures are highest in Queens, with Brooklyn close behind—that is, if you look at one-family houses.  Comparing multi-family houses, Brooklyn has the most foreclosures.  However, Mark Twain said:  “There are three types of lies: lies, damned lies, and statistics.”  For any homeowner, the most important number is “one”, as in “I’m the one about to lose my home”.

Advocates lament that “predatory lending” in minority communities has caused a critical mass of “at-risk” homeowners who defaulted on mortgages or are in danger of defaulting, facing foreclosure and eviction.

Predatory lending and the foreclosure crisis are being addressed at all levels of government.  On August 31, President Bush issued a statement calling on lenders to work with borrowers to prevent foreclosures; earlier this week, the federal reserve called on lenders to undertake “loss mitigation strategies” to curtail default; Sen. Schumer has petitioned regulators to work to prevent foreclosures and has proposed federal funds for not-for-profit groups to assist  at-risk borrowers; state legislators such as Sen. Klein have made legislative proposals to curtail predatory lending and to assist homeowners in financial distress.

My office has participated in community outreach to educate homeowners and prospective homeowners on avoiding predatory lending.  In April the North Crown Heights Civic Association held a seminar at the church of St. Gregory the Great, where representatives from my office spoke.  In July assistants from my office made statements at a legislative hearing on predatory lending.

My office prosecutes mortgage fraud and deed theft, and the recent home equity theft prevention act, which criminalizes foreclosure rescue scams, is a new weapon we have.  However, most unaffordable, predatory loans fall outside the bounds of criminal conduct.  In his statement, President Bush said: “It is not the government’s job to bail out those who made the decision to buy a home they knew they could never afford”; Mayor Bloomberg recently commented that borrowers are responsible for contracts they signed.  Fair lending advocates counter that scammers and predatory lenders manipulated unsophisticated, desperate borrowers into unaffordable loans without fully informing borrowers of what they were getting into.

Such disparate positions and debate are necessary with such complex issues.  But individual homeowners must always be diligent, self-aware, and informed.  My office stands ready to assist the communities of Brooklyn with this critical issue.

If you are a victim of mortgage fraud, contact my Action Center at 718-250-2340. Also, for more information visit www.brooklynda.org.