Firm aiding victims of predatory lending

Grace Leong

Friday, Aug. 23, 2002 | 11:11 a.m.

Las Vegas-area residents who have fallen prey to abusive mortgage lending practices may find relief under a $3 million initiative to be launched by government and industry officials at forums Saturday.

The initiative aims to provide more affordable mortgage payments through refinancing options for borrowers who have been victims of predatory lenders, which typically provide home loans at high interest rates to people with blemished credit histories, sometimes called subprime borrowers.

Organizers of Saturday's initiative also aim to educate homeowners on how to avoid predatory lenders and maintain good credit reports. Partners in the initiative include Rep. Shelley Berkley, D-Nev., Nevada Fair Housing Center, Fannie Mae, Republic Mortgage Insurance Co. and CitiMortgage Inc., a member of Citigroup.

"Abusive lending practices tend to occur mostly in the subprime market because that market isn't regulated and doesn't have the guidelines that are set for conventional and government loans," said Charlene Peterson, director for the Nevada division of Fannie Mae, the nation's largest source of financing for home mortgages.

Predatory lenders, which critics say tend to target the elderly and minorities, typically use high-pressure sales tactics to steer borrowers into higher-cost mortgage loans when they actually qualify for less costly alternatives.

"The way the initiative works is borrowers will have their 'predatory' loans paid off by CitiMortgage (Fannie Mae's lender), which will then refinance the loans at lower interest rates," Peterson said. "In some cases, borrowers could save hundreds of dollars in interest payments under the new initiative."

Michael O'Donovan, Berkley's spokesman, agreed, saying the initiative stemmed from concerns that growth rates in minority homeownership were trailing behind that of national homeownership.

While there is a lack of existing state legislation to deter predatory lending, the U.S. Department of Housing and Urban Development has proposed new federal rules in recent months to curb predatory lending by requiring more disclosure of services provided by lenders and brokers.

Citigroup's participation in the Las Vegas initiative may raise eyebrows since an acquired Citigroup subsidiary, The Associates, was itself accused of predatory lending by the Federal Trade Commission last year.

Peterson, however, said Citigroup is a responsible company.

"Citibank and CitiMortgage, through their acquisitons, may have acquired loan portfolios that unknown to them may have been underwritten with predatory lending practices. But locally we have never seen any intentional predatory lending by Citibank," she said.

"Citibank has a willingness to serve low-income borrowers in a number of initiatives across the country. Citibank has a clean record with Fannie Mae," she said.