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.

For more articles by Lew Sichelman, please press here.

Published: July 27, 2001

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.