HUD Archives: Cuomo Says More Help Is On The Way For New York Homebuyers Victimized By Predatory Lenders

HUD No. 00-303
Further Information:	For Release
In the Washington, DC area: 202/708-0685	Friday
Or contact your local HUD office	October 20, 2000

CUOMO SAYS MORE HELP IS ON THE WAY FOR NEW YORK HOMEBUYERS VICTIMIZED BY PREDATORY LENDERS

NEW YORK CITY – As part of HUD’s nationwide efforts to combat predatory lending, U.S. Housing and Urban Development Secretary Andrew Cuomo today announced that he has awarded $1.1 million in housing counseling grants to New York City agencies, specifically targeted to fight predatory lending. The grants to city agencies are part of a $7.7 million package grants awarded nationwide.

Cuomo, who announced the grants this morning at a joint press conference with U.S. Senator Charles Schumer in Brooklyn, also said that a toll-free consumer hotline will be established to aid New York City homebuyers who have been or suspect they are being victimized by predatory lenders. The anti-predatory lending grants include awards of $75,000 each to Neighborhood Housing Services of Brooklyn, Jamaica Housing Improvements, Inc., and Cypress Hills Local Development Corporation; and, grants of $550,000 to the Association of American Retired Persons (AARP) and $300,000 to the Association of Community Organizations for Reform Now (ACORN), which is headquartered in Brooklyn. The remaining $6.6 million in housing counseling grants goes to 332 housing counseling agencies throughout the United States, including almost $100,000 to counseling agencies in New York City’s five boroughs. In addition to predatory lending counseling, these agencies will also provide pre-purchase counseling, default counseling, reverse-mortgage counseling and home maintenance counseling to homeowners and homebuyers.In addition, callers to the toll-free telephone line -- (877) 554-9316 – will be referred to agencies that will help them avoid predatory loans. HUD also has established a website where consumers can provide information on their case via the Internet. The additional services will be available to any homebuyer in New York, including those insured by HUD’s Federal Housing Administration."Unchecked and unregulated, predatory lenders are rapidly transforming the dream of homeownership into a nightmare," Cuomo said. "The best solution would be for the Congress to act on the wide-ranging legislative recommendations Treasury Secretary Summers and I made in May. Senator Schumer has been a terrific champion on this issue on behalf of New Yorkers and all Americans. Our stepped-up efforts in New York City to protect FHA-insured homeowners from predatory lenders demonstrates a compelling need to provide counseling and assistance to the many more non-FHA homeowners who also are at risk. We need to make sure both non-FHA and FHA borrowers are armed with the information they need to keep the predatory wolves from their doors." The expansion of housing counseling services is HUD’s latest response to the dramatic increase in predatory lending during the 1990s. Earlier this year, Cuomo ordered additional protections for FHA-insured homeowners and buyers in 24 "Hot Zones" in the city with high foreclosure rates. The protections include expanded counseling, a 90-day moratorium on foreclosures on FHA properties in the Hot Zones and a crackdown against unscrupulous lenders, appraisers and real estate agents.A HUD analysis released in May of data under the Home Mortgage Disclosure Act in New York concluded that predatory lending practices are usually directed at homeowners who have accumulated considerable equity in their homes and that low-income, elderly and African-American homeowners are more likely than others to be victimized by such lenders.The analysis of data as well as public forums jointly sponsored by HUD and the Department of Treasury in New York and four other cities – Atlanta, Baltimore, Chicago and Los Angeles – served as the basis for a 115-page report to Congress, Curbing Predatory Home Mortgage Lending, in which HUD and Treasury jointly recommended wholesale legislative and regulatory changes to the entire lending marketplace "to combat predatory lending, while maintaining access to credit for low- and moderate-income borrowers." Predatory and abusive lending practices that HUD has targeted have been found to be most prevalent in the subprime, non-government insured market. They include loan flipping, excessive mortgage fees, interest rates and credit life insurance charges, and home improvement deals that rarely result in the improvements being made but do result in stripping homeowners of the equity in their property.

With the rapid growth of the unregulated subprime market during the 1990s , Cuomo and HUD have greatly increased their efforts to secure protections for consumers against predatory lenders. Earlier this year, for example, Cuomo and Secretary Summers convened joint forums on predatory lending in Atlanta, Chicago, Baltimore, New York and Los Angeles.Using his authority as Secretary, Cuomo earlier this year ordered the FHA to establish a Fraud Prevention Program for homeowners and homebuyers whose mortgages are insured by FHA, including the launch of Hot Zones in cities with particularly high FHA foreclosure rates. The five cities first selected for HUD’s Hot Zone program are New York, Atlanta, Baltimore, Chicago and Los Angeles. HUD has designated 24 Zip Code areas in New York as Hot Zones. They are 10456, 10457, 10458, 10460, 10466, 10467, 10468, 10472 and 10473 in The Bronx; 11203, 11207, 11208, 11216, 11221, 11233, 11236 and 11237 in Brooklyn; 10027 in Manhattan; and 11412, 11419, 11420, 11433, 11434 and 11691 in Queens.

There are 23,780 FHA-insured homes in the 24 Zip Code areas designated as HUD Hot Zones, or about 45 percent of the total inventory of FHA-insured homes in New York City. Some 2,200 of these homes currently are in default, most of which will "mature out" of or recover from default, but about 650 would actually go into foreclosure without remedial assistance from FHA."The vast majority of FHA’s 7,000 lender partners are honest business people who help families buy the right home for the right price," Cuomo said, "But we will not rest until we know that not one FHA borrower falls prey to these practices."Under HUD’s Fraud Prevention Program, homebuyers in Hot Zone areas will receive the following services:

A 90-day moratorium on foreclosures in those neighborhoods where predatory lending is discovered and assist more FHA borrowers in default to avoid foreclosure.

Detect evidence of inflated property appraisals before endorsing home loans for FHA mortgage insurance. Using new technology, FHA is the first lender in the country to use on-line access to obtain the sales history of properties it has been asked to insure. If the review indicates that a home has been sold on a repeat basis over the prior 12 months for a price that is more than 30 percent higher than the previous sale, FHA is requiring its staff to re-underwrite the loan prior to closing to insure that the appraisal accurately reflects market conditions.

Stepped-up enforcement actions against lenders who do not follow FHA underwriting guidelines or who commit fraud. FHA has directed its approximately 60 East Coast lender monitors to focus on activities of lenders, appraisers and real estate agents operating in Hot Zones.

Enhanced counseling services to homebuyers. In addition to allocating some $2 million nationwide for enhanced counseling services, HUD has assigned some 20 foreclosure avoidance specialists from its National Loss Mitigation Center to provide assistance to counseling agencies working to protect homebuyers from predatory loan practices.
Provide relief to victims of predatory lending. In the event HUD finds evidence of inflated appraisals, FHA will demand that the originating lender write-down the mortgage to a price reflecting the actual fair market value of the property. If the lender refuses, HUD will cancel the existing mortgage and arrange for refinancing to bring the mortgage into line with market prices. HUD also will provide victims of predatory practices with credit repair letters that will ask credit reporting agencies to erase any blemishes on the victim’s credit attributable to the predatory mortgage.

The FHA insures nearly seven million homes nationwide, of which 50,700 are located in the five boroughs of New York City. Nationally, its foreclosure rate is 1 percent. Since FHA is supported entirely by premiums paid by FHA borrowers, no taxpayer funds are used to support its operations or are at risk in the event of foreclosure of one of its insured properties.

HUD Archives: News Releases