Half the people who have asked for relief under a program to aid borrowers who have been victimized by predatory lenders were not duped at all, according to a community activist.

"They believed they were wronged but it was really a matter of education," said David Berenbaum of the National Community Reinvestment Coalition, a Washington-based group which operates the Consumer Rescue Fund with a $12 million commitment from Household Finance.

Berenbaum is senior vice president for policy and the director of civil rights for NCRC, a coalition of 800 non-profit groups that seek to increase the flow of private capital into traditionally undeserved communities.

He told the Mortgage Bankers Association's Subprime Lending Conference recently that 500 consumers have come forward during the first year of the program, "a much larger number than we expected."

But only 250 were actually victims of abusive lending tactics, he said. The other 250 just needed either financial education or counseling to understand the issues. Of the group who were scammed in one way or another, the consumer advocate also reported, about 45 percent received their mortgages through brokers who were nowhere to be found once the loans were placed with funding lenders.

Worse, he added, nearly two-thirds of the victims had prime credit before they took out subprime loans and could have qualified for a conventional mortgage at rock-bottom rates.

Lenders have long maintained that it is a few rotten apple loan brokers who are spoiling the barrel for legitimate mortgage professionals who do a decent job on behalf of their clients.

In "well over" half the situations in which borrowers were wronged, Berenbaum said, those who had direct contact with lenders were able to get their loans rewritten and are now satisfied.

In some cases, onerous terms were negotiated away. In others, the loans were repackaged, "often at below market rates," to give borrowers a fresh start.

But in 10 pecent of the instances, borrowers' problems could not be solved. "There was nothing we could do," the activist said. "There was no way to save them." In his remarks to the conference, Berenbaum said he had no interest in stopping abusive lending practices by forcing legitimate subprime lenders out of inner city neighborhoods where most of the victims of abusive lending practices reside.

While there are problem lenders, he told the meeting, "we believe lenders are the best hope to promote stable communities."

"We want you there in the community," he said. "We want to partner with you."

The NCRC official also agreed with the mortgage community that there needs to be "a strong national standard" governing subprime lending, and suggested that consumer groups and industry officials "come together and lock ourselves in a room to solve the issues."

Published: May 14, 2003

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