|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 HUDs 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 Citys
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 HUDs 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 HUDs 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 HUDs 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 FHAs 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 HUDs 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 victims 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.