California Predatory Lending Lawyers

NAACP Sues “Predatory”
Mortgage Lenders

Important Predatory Lending Information

In a move against "financial apartheid," the NAACP recently announced that it is suing 12 mortgage lenders for discriminatory lending practices. The lawsuits, which were filed in Los Angeles' U.S. District Court, seek a court order against the lenders, who are accused of steering blacks towards sub-prime (higher-interest) loans and giving white borrowers better loan terms and interest rates.

The companies named in the NAACP lawsuit include HSBC Finance Corp., Washington Mutual, Inc., Citigroup, Inc., and Ameriquest Mortgage Co. All of these companies offer so-called "sub-prime" loans -- home loans that are given to borrowers who do not meet financial requirements for "mainstream" loans. Failure to qualify for a mainstream loan is usually due to a low credit score, but can also depend on other factors such as the type of loan sought. However, in their lawsuit, which seeks class-action status, the NAACP claims that lenders targeted blacks with sub-prime offerings while offering white customers with similar credit histories and financial qualifications better loans.

Though the NAACP lawsuit does not contain specific examples, the civil rights group draws upon several studies on borrower discrimination, including a Center For Responsible Lending study which found blacks to be up to 34 percent more likely to be sold sub-prime loans than their white counterparts with similar financial backgrounds.

The accused lenders are already fighting back with press conferences, official statements and denials, but their words are falling flat in an economy that is watching the near complete collapse of the sub-prime market. Since sub-prime interest rates are so high and are not fixed, many consumers have fallen behind on their ever-increasing payments over the past few years. This has led to a wave of foreclosures that threatens the once-robust U.S. real estate market. The revelation that racial discrimination could have something to do with the preponderance of sub-prime mortgages merely adds insult to injury for consumers who have to deal with the spectre of angry creditors, missed payments and even foreclosure, wage garnishment and bankruptcy.

How did the "predatory" practices cited by the NAACP discrimination lawsuit emerge? Experts say that though the sub-prime market could be used as a springboard to enable underserved communities to achieve home ownership, unscrupulous lenders are taking advantage of people of color by locking them into HARMs (hybrid adjustable-rate mortgages). HARM loans begin on a fixed basis, but require increased payments within just a few years and usually involve extreme increases every few months. Though HARMs are initially attractive due to their low interest rates, they become a liability for customers who end up paying up to 50 percent more than their initial rate within just a few years. Many consumers who are unable to make payments on their HARMs are forced to refinance or face foreclosure and bankruptcy.

The NAACP claims that people of color are hit hardest by HARM loans, citing Federal Reserve Bank statistics that show that 80 percent of all home loans offered through the sub-prime market are HARMs, that African-American borrowers were more than three times more likely to be offered a sub-prime or HARM loan than their white counterparts, and that over half of all mortgage loans offered to blacks were sub-prime in 2005 alone. This epidemic of sub-prime steering has grave costs for communities of color, who see their stake in the American dream deteriorate as interest rates spike and creditors keep calling.

NAACP and other civil rights groups are calling not only for a nationwide moratorium on sub-prime foreclosures while the discrimination suit is pursued, but for lenders to comply with fair credit and fair housing laws. They seek a court order preventing the discrimination that forces people of color into the sub-prime market while allowing whites of the same financial profile to profit from the color of their skin.

Creditor harassment, forced refinancing, the threat of foreclosure and even bankruptcy can be the most stressful situation any borrower faces. Add discrimination to the mix, and you have an intolerable combination of financial and social pressure that no borrower should have to face. If you have faced discriminatory lending practices and believe you have been steered toward a sub-prime loan because of your race or ethnicity, you need a competent, aggressive and proactive legal team on your side. You need one of the fine attorneys of Bisnar | Chase, LLP.

Since 1978, Bisnar | Chase has sought justice for thousands of plaintiffs. Committed to personalized service and excellence in litigation, Bisnar | Chase has the resources needed to aggressively and professionally pursue your mortgage discrimination claim. Bisnar | Chase may be able to recover compensation for the financial disadvantages you’ve faced due to discriminatory lending practices at the hands of companies like Ameriquest, Washington Mutual and Citibank.

Interested in a confidential, no-obligation consultation? It’s free and easy – just fill out the contact form to get in touch with a mortgage discrimination lawyer today.

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