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Predatory Loans Have Residents Seeing Red
Foreclosing on Bed-Stuy
by Ta-Nehisi Coates
October 23 - 29, 2002
Just as a matter of interest, could it be that an appraiser, working in conjunction with a predatory lender, is doing his job by encouraging over financing, and thus allowing the property to be recycled back onto the market at a higher price? Isn't his loyalty to the client's interest paramount? And in cases like this, isn't it in the interest of the community to evict those who can only make $26,000 a year to make room for those who make $100,000+ per year?
Is there a moral issue here and if there is, should we allow that issue to color business practice?
Predatory Loans Have Residents Seeing Red
Foreclosing on Bed-Stuy
by Ta-Nehisi Coates
October 23 - 29, 2002
Barnabas purchased her two-story fixer-upper in 1991, and even if the house has yet to escape that designation, Barnabas counts her blessings that the deed is still in her name. Within a couple of years of buying the house, Barnabas almost lost it via a second mortgage she took out to make her home livable.
The second mortgage was for $180,000, more than three times what Barnabas paid for the house, and a hefty sum given her $26,000 gross annual income. More significant than the loan's size was the fine print, which reveals the intricacies of a con job that has swept through Bed-Stuy and working-class neighborhoods across the country. Equicredit, the company that provided Barnabas's loan, was a one-stop shop that handled her financing and even the contracting for repairs. One quarter of the money she borrowed—$45,000—went toward various fees that had nothing to do with fixing her home. Her interest rate was 12.95 percent at a time when the national average was 10.5 percent, bringing her monthly payment to $1981. On her limited income, meeting such a bill left her less than $185 a month to pay the rest of her bills.
Much of what gives Bed-Stuy its charm has made the area a target for predators. The neighborhood's most distinguishing feature is its trove of gorgeous brownstones. For years, despite their beauty, these homes did not attract much attention due to Bed-Stuy's reputation as a historically black neighborhood troubled since the '60s with crime and economic decline. Gentrification and an influx of new renters, followed by buyers, has been occurring at the edges of Bed-Stuy for almost 20 years. But with neighboring Prospect Heights, Clinton Hill, and Fort Greene drying up, and residents trying to kick-start development in the neighborhood, Bed-Stuy has become a jewel in the eyes of prospective buyers. "Folks just fell in love with the brownstones," says Don Baylor, legislative director for the Association of Community Organizations for Reform Now of New York (ACORN). "The demand just wasn't there 15 years ago."
Just as a matter of interest, could it be that an appraiser, working in conjunction with a predatory lender, is doing his job by encouraging over financing, and thus allowing the property to be recycled back onto the market at a higher price? Isn't his loyalty to the client's interest paramount? And in cases like this, isn't it in the interest of the community to evict those who can only make $26,000 a year to make room for those who make $100,000+ per year?
Is there a moral issue here and if there is, should we allow that issue to color business practice?