Predatory lending: one victim's story
By Michael D. Larson • Bankrate.com

Are predatory lenders really that big of a threat? Helen Ferguson thinks so. After all, the 78-year old widow almost lost her home.

"I thought I could handle things myself," Ferguson says. "I saw these people on the TV and read the newpsaper and they were so kind and good, so I thought."

But according to court documents, a mortgage company she dealt with flipped her loan repeatedly over the course of several years, charging more than $30,000 in fees. Because the transactions were done in such a way that Ferguson couldn't possibly make her loan payments, advocates charge, she almost lost the Washington, D.C., home she's lived in since 1965.

"They worked with me pretty good -- until things got out of hand," Ferguson says. "Oh, I was almost drowning and I didn't know what to do."

Why legislation is necessary
Ferguson's story shows why predatory lending legislation of the type now being considered in Congress is needed, say consumer advocates, including Nina Simon, a senior staff attorney with the AARP Foundation who worked on her case. Without it, mortgage companies will be free to continue targeting vulnerable borrowers with high-rate, high-cost loans they can't afford to repay, the advocates say.

"People who used to have to beg for credit are now being romanced at every turn. They're being called. They're being inundated with solicitations to take out credit because it exists and because money can be made on it," says Simon. "But because we've seen such a widespread occurrence of these problems, we've come to question how much of subprime lending really is fair and responsible."

Was Ferguson one of those victimized? That's what her supporters, including members of a special Senate committee on lending abuses who invited her to publicly tell her story in March 1998, believe.

She first approached First Government Mortgage and Investors Corp. of Landover, Md. in 1991 because she wanted to refinance two existing mortgages she had taken out for home repairs, according to interviews and court documents. Over the course of the next four and a half years, however, the company refinanced her loan as many as five times. It charged lender fees totaling more than 10 percent of the loan balance in all but one of those cases.

Some documents missing
The exact details of every transaction aren't available because Ferguson doesn't have all of her loan documents and at least one mortgage looks like it was never recorded. But with AARP's help, Ferguson sued First Government Mortgage and related parties in 1997, charging they behaved "unconscionably" by charging excessive fees, taking advantage of her lack of financing expertise and failing to provide proper disclosures.

In March 1999, First Government Mortgage signed an enforcement agreement with the Department of Housing and Urban Development that effectively settled the suit. It required the company to set up a secondary review process for its loan applications, beef up fair housing training, pay Ferguson $11,625 and release its claim against her property.

When contacted by Bankrate.com about the agreement, First Government Mortgage executive vice president Gregg Lilienfield said he didn't know much about it, even though his signature is on the document. He then said he had no further comment and hung up. Mortgage company attorneys didn't return separate phone calls for more information.

Experts say it's unclear how widespread problems like Ferguson's are. Consumer advocates say predatory lenders have wreaked havoc on neighborhoods around the country, especially in big cities such as Washington and Chicago. Subprime lenders, on the other hand, say the problem's been overstated. Regardless, at least one woman's just happy her ordeal is over.

"I thought I was going to lose everything, but it came out wonderful," says Ferguson. "I am so happy and I told everybody I'm going to sit down and write a thank you letter and put it in the paper."