Mortgage Scams Run Rampant In NY

Across New York State, predatory lending practices are being discovered by the State Commission of Investigations

By: James R. Lindamood

In a report released Thursday, it was shown mortgage scammers have been taking advantage of loopholes in New York's lending laws for years. They use the lookholes to defraud homeowners and lenders all across the state. The New York state Commission of Investigations has reported that the state's borrowers need to have more protection from predatory lenders. The report also explores the link between subprime loans and the foreclosure crisis. According to the report, in '07, 59 percent of defaults were subprime loans.

Alfred Lerner, the Commission's Chaiman, categorized the principle focus of the investigation as subprime mortgage fraud. The Commission investigated claims of obvious predatory lending practices. One of the most egregious of these is the story of Suzette Francis, who testified earlier this year in front of the Commission, was a woman with no assets and a $10 an hour job as a security guard. Ms. Francis somehow qualified for a $470,000 loan for a home, with no down payment. She qualified for an adjustable rate mortgage, which started at 10.8% and was capped at 16.85%. Her monthly payment starting out was over $4,000 per month. In order to make that much, she would have had to work 400 hours per month just to make the basic payment.

The Commission is also investigating the propensity that predatory lenders have of targeting minority borrowers. The Commission found that minority communities around the state have been targeted, including Hispanic and African-American borrowers. Minority borrowers, according to the report, were shown to have nearly twice the rate of subprime loans as white borrowers.