Legislation & Lobbying

Seniors, Good Credit Risks Targeted By Lenders; Mortgage Solution Sought

It isn’t just people with poor credit who are now suffering in the aftermath of a subprime lending spree. And, although a federal government plan is supposed to be announced later this week to help financially struggling homeowners, it appears unlikely to do much to rescue many of those now in need of help as payments on adjustable-rate subprime mortgages, often offered at artificially low initial teaser rates, exponentially escalate.

Subprime lenders targeted a number of naive individuals who qualified for better loan terms but didn’t understand their mortgage purchasing power, the Wall Street Journal (sub. req.) reports today. Even worse, senior citizens with diminishing mental capacity have been targeted and stripped of their home equity in illegal predatory lending schemes that offer unsuitable mortgages to individuals who can’t afford them, according to the Seattle Times.

“You can’t take away a house with a gun, but you can take it away with a piece of paper,” says Melissa Huelsman, one of four Seattle area lawyers who handle predatory lending cases. “We, as a society, should treat that as a serious crime.”

An announcement is expected by the end of the week about a cooperative homeowner relief program involving the Bush administration, Congress and mortgage lenders, reports Reuters. One key feature is expected to be a “teaser-freezer” interest-rate lock for homeowners who can continue to make monthly payments at the same level as initially, but cannot afford higher payments and lack the credit to refinance.

However, the new program may not do a great deal for many homeowners who need help, reports the New York Times. Hence, Treasury Secretary Henry Paulson is calling on Congress to enact legislation to permit the Federal Housing Administration to guarantee loans that would help shore up delinquent subprime borrowers, writes Bloomberg.

Meanwhile, even being a relatively well-to-do attorney’s widow represented by counsel in real estate transactions may not be enough to protect the elderly against financial fleecing, according to another Seattle Times article.

As discussed in earlier ABAJournal.com posts, the subprime debt debacle has apparently played a key role in huge increases in U.S. mortgage foreclosures and a worldwide credit crunch in recent months.

At the same time, litigators have their work cut out for them as potential plaintiffs complain about being unwitting purchasers of risky assets, among other potential causes of action.

Associated Press (“Experts: Bailout Not Complete Solution”).

New York Times (“Innovating Our Way to Financial Crisis”).

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