Unscrupulous lenders are cheating home owners out of an estimated $9.1 billion a year, the Senate Banking Committee was told yesterday.

The calculation was offered by Martin Eakes of the North Carolina-based Coalition for Responsible Lending, which has issued the first-ever report attempting to quantify the impact of abusive lending practices, often known as "predatory" lending.

Eakes, who also is president of Self-Help, a nonprofit lender that has provided $1.6 billion in financing to low-wealth individuals in 43 states over the past 20 years, said the evaluation is based on these illegal or immoral practices:

• "Equity stripping," characterized by excessive fees collected up front (such as origination or broker fees); additional finance fees (such as single premium credit insurance); and back-end fees (such as prepayment penalties). The CRL report estimated the cost of these practices at $6.2 billion per year.

• Interest rate disparities in which borrowers are charged a higher interest rate than risk can justify for a loan, often from a subprime affiliate of a conventional lender. The report said low-wealth borrowers pay an estimated $2.9 billion in excess interest per year.

"The ultimate and tragic consequence of these predatory practices is foreclosure," Eakes told the Senate panel, which is looking into ways to curtail such abuses.

"Subprime loans with predatory terms are far more likely to end in foreclosure than conventional loans," he said. "Boarded-up homes in low-income neighborhoods carry a social cost far beyond the cost of the foreclosures themselves."

The affordable housing advocates said that the "most important lending issue today is no longer denial of credit, but the terms of credit."

The Coalition was a driving force behind landmark legislation in North Carolina to curb lending abuses.

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