Feeding frenzy 

Will Georgia legislators pull the fangs from unscrupulous lenders?

Page 5 of 6

"Many people who should get low- interest prime loans are told they don't qualify," Brennan says. "They're told that to get money, they have to take a subprime loan with its high interest, fees, balloons and all the rest."

According to Consumer Reports, as many as 15 percent of subprime borrowers have prime rate credit scores -- but the customers don't know that. Other estimates peg the percentage of people unfairly pushed into subprime loans at 30. And as many as 75 percent of subprime borrowers actually have good credit histories with only minor delinquencies in the previous year.

The final fallback argument of lenders is that the high rates and fees -- as well as balloons, prepayment penalties and all the other methods to pick consumers' pockets -- are justified because subprime borrowers are more likely to be deadbeats. "It's reasonable for us to charge higher rates because we have a higher risk," says Household's Hayden.

Aside from the fact that many of the loans are designed to fail so that lenders can get the title to the real estate (one reason DeKalb County has the highest foreclosure rates in the state), a truthful analysis shows the loans are very safe.

"Think about it," Brennan says. "Most of these loans are for 80 percent of the value of the homes. If the borrower defaults, the lender gets the house and sells it for a profit. And if it looks as though the debt is higher than the value of the home, it's because of all of the fees the lender has packed into the deal."

At Israel Missionary Baptist Church in Kirkwood Nov. 29, politicians, activists and about 200 just plain folks gathered for a meeting that was part revival and part Economics 101 lesson.

An elderly black man welcomed a stranger by offering a smudged and rumpled sheet of paper with a scrawled bit of biblical verse on it. "You read this," the man commanded. "Then you listen to Senator Fort," the night's keynote speaker.

Ethel Ivey told the audience that she "had been praying and asking God to direct me" on how to save her home from unscrupulous lenders. Abundant punctuations of "Amen!" boomed from the audience.

The 59-year-old black matron was preceded by a 41-year-old white woman from Haralson County, Gaylon Shealy.

There were similarities between the women. Both were hand-to-mouth poor, both had almost lost their homes to lenders. Viewed from a different perspective, however, they appeared to live in Georgia's two worlds, spheres that seldom overlap. Ivey's life has been shaped by civil rights and the politics of a minority-dominated big city. Shealy is the essence of poor Southern white. She's largely unlettered, rural in speech and demeanor.

Shealy looked uneasy as she began addressing the predominantly black crowd. But applause greeted her tale just as it would Ivey's. Fighting tears, Shealy told how a mortgage company had almost ruined her life.

Shealy and her husband had purchased a 100-year-old Draketown home for $25,000. They owed only $22,000 at 8 percent, with payments less than $300.

But they needed to make some repairs. Rather than merely lending them the needed few thousand dollars, a mortgage company pressured Shealy into refinancing the home for $44,000. Shealy's attorney, Millard Farmer of Atlanta, contends the roughly 13 percent fees and closing costs on the loan were "100,000 percent illegal," that the lender lied in loan documents, and that essential facts about the loan were concealed.

Shealy, who suffers from multiple sclerosis, has a monthly income of about $640. She fell behind in payments -- which, at 11.79 percent interest, had climbed to $449 a month. The lender refused to give her a payoff amount on the loan -- a common predatory tactic. So, she couldn't pay off the debt.

Eventually, Shealy was evicted. "They took my grandmother's things, everything we had," she told the audience. The eviction, too, was done illegally, Farmer says.

"They didn't count on me being a fighter," Shealy said haltingly into a microphone. "But I got a litigation going on now. I intend to get my house back."

The two women have shown that even little people can beat giant predators at their game of creating never-ending and always-escalating debt.

The Scripture handed out at the church's door was an eloquent explanation of what had brought together these two women -- representatives of cultures that likely would have been enemies in another time. The verse, Habakkuk 2:7, was a warning to bankers and their lawyers:

"Will not your debtors suddenly arise, and those awake who will make you tremble?"



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