Predatory lenders are masters at making new borrowers feel as if they've just won the lottery, and later foreclosing on their homes. On Nov. 13, the Pittsburgh Community Reinvestment Group unveiled a program that might really be a bonanza for screwed borrowers -- if they fit a certain credit profile, and if the price is right.
Predatory lenders trick homeowners into signing mortgages that include unreasonably high interest rates, fees and insurance charges; require payments the borrower obviously can't make; or exceed the real value of the home. PCRG, an umbrella group representing 25 neighborhood organizations, says predatory lending has been a key factor in the four-fold increase in foreclosure filings in Allegheny County since 1995.
For the past year, PCRG has been publicizing the dangers of abusive lending, helping bilked borrowers to get legal help, and even negotiating down the terms of some bad loans. What's been missing is the financial muscle to replace bum loans with fair mortgages. That gap was filled Nov. 13, when PCRG, the giant mortgage underwriter Fannie Mae, and three banks unveiled a $1 million program to refinance bad loans.
Here's how it works. Borrowers who feel they've been cheated call PCRG Program Manager Greg Simmons, who connects them with a lawyer and a credit counselor, and everybody teams up to try to negotiate down the principal and interest on the loan, and improve the borrower's credit rating. If they succeed, one of the three involved banks -- National City, Sky Bank and Parkvale -- replace the bad loan with a good one. Fannie Mae will back up to $1 million in such loans made by National City and Sky Bank; Parkvale intends to self-finance its loans.
For some borrowers, the result could be a several-hundred-dollar reduction in their monthly payment. But PCRG can't rework every loan. Some lenders just won't negotiate down their principals and interest rates, and the banks won't refinance inflated loans. And though people whose credit ratings were trashed because of a predatory loan are eligible, those whose debts were out of control even before they were tricked won't meet the banks' standards.
The best bet is to drive predatory lenders away from the door before they convince you to sign on the dotted line, says Aggie Brose, chairwoman of PCRG's Anti-Predatory Lending Initiative. "If they're in your front room, at your door, on your phone, in your mailbox, 9 times out of 10 they're a predatory lender," says Brose. "Don't fall into the wolf's hands!"
Call the PCRG's Greg Simmons at 412-391-6732.