Predatory Lending

Evolution of Predatory Lending | Predatory Lending Practices

Although the nation has made great progress in increasing homeownership, we still face the significant challenge of fighting predatory lending. Predatory lenders use high-pressure sales tactics to convince borrowers to pledge their homes as collateral for loans that cost more in interest and fees than loans offered by reputable lenders. All homeowners are at risk, but elderly, minority and lower-income owners are especially vulnerable.

Nonprofit organizations throughout the country are seeing an increased number of homeowners who have been victimized by predatory lenders, including:

• A 58-year-old dishwasher from Vermont with an eighth-grade education who lost a home that she had been given because she fell behind on a predatory home-improvement loan that, in turn, had consolidated her consumer debts and pledged her house as security.
• A Habitat for Humanity homeowner in North Carolina who saw his original $33,000 debt, at zero percent, nearly double to $61,500 and the interest rate soar to 12.9 percent before his home fell into foreclosure.
• A suburban Chicago geriatric nurse who had to take on a second job to keep up with the payments as her mortgage zoomed from $48,000 to more than $400,000 for remodeling and debt consolidation.

In response to this disturbing trend, NeighborWorks America hosted predatory lending forums for industry staff, created a homeowner education curriculum on the topic, and developed partnerships with consumer and housing groups to discuss and monitor legislative and regulatory solutions. Through their speeches and public appearances, NeighborWorks America board members and officers are also working to raise awareness of the issue.

This section of the NeighborWorks America Web site contains resources for consumers and community development practitioners who wish to combat and avoid predatory lending. Many of the resources were created by NeighborWorks Training Institute faculty who teach courses on predatory lending.