Our community of elderly, retired homeowners has become a veritable jackpot for predatory lenders. The longer a homeowner has been in his home, the greater the accumulation of equity. Families today move more often than their parents or grandparents did, making the older, retired generation the perfect potential victim of a predatory loan.
Many older homeowners view their home as an investment or savings plan for their future retirement. They look forward to the days of no more mortgage payments and to the profit they can retire on when selling their lifelong home. Predatory lenders look forward to this equity buildup as well because they seek to profit from it! Predatory lenders historically extend loans based on the value and equity in a home rather than the ability of the borrower to repay the loan. Couples on fixed incomes, in a financial bind, are coerced into accepting loans against their home’s equity without realizing the true costs of these loans. Predatory loans can include one or more of the following:
- excessive loan fees
- extremely high interest rates
- expensive credit life insurance premiums
- homeowner’s insurance recommended by the lender
- prepayment penalties
- large balloon payments
- negative amortization
Mortgage contracts have become progressively complicated through the years. The requirement of more detailed explanations in contracts has only proven to lengthen these contracts and further confuse those less familiar with financial transactions. This again leaves the elderly in a vulnerable position when borrowing money.
The National Housing Institute, in its 2005 Jan./Feb. issue, relayed the story of an 84 year old widow, Florence McKnight. While lying in the hospital under heavy sedation she signed loan documents for the installation of new windows and other general repairs to her home. The bill for the work was only $10,000. The loan offered her was for $50,000. The 15 year loan amounted to $72,000 in payments with a balloon due at the end for $40,000. Those were some very expensive windows that someone else is now enjoying because Ms. McKnight was forced into foreclosure and lost her home.
Occasionally, legitimate subprime fha loans Houston can offer great help to people in financial trouble that are unable to get a conventional loan. But the temptation here just seems to be too great for predatory lenders. Subprime predatory loans benefit no one but the lender. The elderly community is stripped of their home’s equity and often forced into foreclosure. They must rely on their children to survive, as their incomes are fixed and now their credit is destroyed. This retired group is even encouraged by predatory lenders to take out loans to pay for their prescription medication!
The spike in sub-prime lending has not surprisingly coincided with the increase in foreclosures. It’s a real shame that one of our most treasured assets – our parents and grandparents are being ruthlessly solicited for the consumption of the equity they have so diligently strived to accumulate over the years. Predatory lenders use deceptive tactics to rob the next generation of their life long family memories as well the inheritance their parents had dreamed of leaving to them. Every day older Americans are losing their primary source of wealth, their retirement nest egg through the unethical practices of predatory lenders.