Agenda - 05-16-2006-5j - Laserfiche WebLink

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NO City of Cuyahoga Falls, Ohio 35 88 o A8 Analysis of Impediments to Fair Housing Choice Since wealth for the vast majority of Americans is tied to property ownership, this system is threatening to deprive many Americans of their wealth by robbing them of their home's equity and, in some cases, foreclosing on the homes of people who cannot afford the exorbitant interest rates and high points, It is estimated that approximately 25% of all sub prime loans contain one or more terms that can be classified as predatory." Mainstream financial institutions have excluded many of the groups targeted by predatory lenders when they market loan products. Additionally, these unknowing consumers find themselves in these devastating positions due to a lack of financial savvy. The lending process is very complicated with numerous forms to be completed. Many consumers are ill prepared to deal with the enormous volume of complicated paperwork that is given to them during the loan process. Reports show that consumers do not understand the process. Which is like the old analogy of a fox guarding the hen house, the very person who is trying to make the loan is the one giving advice on the quality of the loan and what the loan means. Most predatory lenders, however, do not provide quality counseling for consumers seeking their products and use the consumer's ignorance as a ripe opportunity to recap huge profits from selling money in this industry. Recent studies show that subprime lenders are far more profitable than their conventional counterparts. For instance, a small analysis of seven national lenders reveals that the earnings -to -loan volume ratio for sub prime lenders is substantially higher than that for conventional or prime lenders. Many times, consumers are paying too much interest for credit they secure, and they are purchasing credit life and disability insurance products for which they have little or no use. Moreover, these loans are often secured with consumers property, and fair housing organizations have received complaints from consumers who are about to lose their homes because they cannot afford the high cost loan they obtained. According to The Woodstock Institute, from 1993 to 1998, loans made by prime lenders rose substantially slower than those by sub prime lenders, with 38% increase in home purchase loans and a 2.5% increase in refinance loans, Corresponding increases among sub prime lenders were 760% and 890% respectively. One possible reason for this dramatic increase in loans made by sub prime lenders pertains to the increasingly segmented system of consumerfinance with higherincome communities as the main target of more highly regulated banks, thrifts (formerly called savings and loan ) and their affiliates who seek to cross -sell account ans investment products. At the same time, lending to lower income and minority communities is often viewed as an isolated line of business, in which the focus is on the short -lived transaction and associated fees. Lenders active in these communities tend to be mortgage and finance companies subject to substantially less regulation than banks and thrifts, "Council on Homelessness and Housing in Ohio - 2000