New Public Service Announcements Aimed at Protecting Consumers from Predatory Lending
Feature Story by Karen Tanenbaum - 9/30/2008
On September 10, the National Fair Housing Alliance (NFHA) and the Advertising Council released a series of public service announcements, or PSAs, designed to educate consumers about predatory lending practices and how they can protect themselves from these practices.
Predatory lending, described by NFHA as "a set of unfair, unethical and often illegal lending practices designed specifically to deceive unsuspecting homeowners," has been pegged as a major factor that led to the current mortgage crisis.
Fair housing advocates hope the PSAs both inform consumers of predatory lending practices and equip them with the tools and questions necessary to protect themselves.
"When consumers are not aware of their true risk and the lending options available to them, they can be taken advantage of… Knowing the right questions to ask will certainly put consumers in a position to get the best loan available to them," said Shana Smith, president and CEO of NFHA, in a statement announcing the PSAs.
The PSAs target communities that tend to be vulnerable to predatory lending, such as first-time home buyers, Latinos, and African Americans. According to a May 2006 report from the Center for Responsible Lending (CRL), African-American and Latino families were more than 30 percent more likely to get high-cost loans than White borrowers with similar credit histories.
In the subprime loan market, borrowers that were considered "high-risk" because of their income, job, or credit histories were offered loans with higher interest rates and less flexibility in payment.
While subprime loans seemed like a logical option for borrowers with lower credit scores, many borrowers were led to sign for loans they were unable to repay, encouraged to refinance in order to pay them, and denied information about more affordable loans that they may have qualified for.
According to a study by First American Loan Performance, a San Francisco research firm, a whopping 61 percent of borrowers in the subprime market in 2006 actually qualified for conventional loans with much better rates than they were given.
NFHA encourages consumers to call 1-866-222-FAIR or to visit www.QuestionsProtect.org to view the PSAs and find more resources on avoiding predatory lending.
