Program seeks to educate citizens about predatory lending.
As the effects of the recent collapse of the housing market around the country are still being felt, cities are finding ways to educate their citizens about how to avoid loan troubles and predatory lending.
One program that is having a nationwide impact is Freddie Mac's Don't Borrow Trouble campaign, a program pioneered in Boston by Mayor Thomas M. Menino and the Massachusetts Community & Banking Council.
Don't Borrow Trouble is a comprehensive consumer awareness campaign, combining public education and counseling services to help homeowners avoid predatory lending scams and foreclosures.
Although predatory lending is not defined by federal law and individual states define abusive lending differently, these practices usually involve stripping equity away from a homeowner. Predatory or abusive lending practices can include:
* Repeatedly refinancing a loan within a short period of time and charging high points and fees with each refinance;
* "Packing" a loan with single premium credit insurance products, such as credit life insurance, and not adequately disclosing the inclusion, cost or any additional fees associated with the insurance; and
* Charging excessive rates and fees to a borrower who qualifies for lower rates and/or fees offered by the lender.
Many cities are taking steps that include coordinating homebuyer education workshops with community-based organizations, hosting local summits on the issue of predatory lending and foreclosure prevention, and working with the media to increase awareness of the issues.
By the end of 2007, the Don't Borrow Trouble campaign had reached more than 350,000 consumers through 50 local campaigns in 31 states and the District of Columbia.
A combination of ads, brochures, websites and public service announcements in English and Spanish are used to educate consumers about predatory lending and avoiding foreclosure.
A toll-free number for consumers is also provided to help obtain referrals to local government and housing counseling agencies.
Cities, such as the following, have successfully implemented campaigns to help their citizens in a variety of ways.
The Dayton Don't Borrow Trouble campaign employs a full local media campaign coordinated by a local advertising agency with billboards, radio/TV ads, bus placards, brochures, newspaper ads, news conferences highlighting victims' stories, and "Neighborhood Walks."
These walks involve eight to 10 Volunteers walking door-to-door in those neighborhoods where there are high concentrations of subprime and/or predatory lending. This activity creates an opportunity for consumers to receive important information in the comfort of their own home, the same place where predatory lenders market their products.
The campaign has enjoyed a good response to its outreach efforts, but the most successful is the predatory lending neighborhood walks.
Buffalo, N. Y.
The Buffalo Don't Borrow Trouble campaign has a comprehensive educational program not only for consumers, but also for housing agencies and other professionals participating in the mortgage process. It is so well regarded that local agencies refer their clients with predatory loans to the Don't Borrow Trouble campaign.
Additionally, the Buffalo Don't Borrow Trouble campaign trains other housing agencies, real estate professionals, appraisers and other mortgage professionals in spotting predatory practices. The city recommends that all agencies receiving Community Development Block Grant funds receive this training.
To help homeowners avoid predatory lenders, Philadelphia's Don't Borrow Trouble campaign offers the PHIL-Plus and Mini-PHIL loan products. Both products assist homeowners with less-than-perfect credit obtain money for home repairs.
With Phil-Plus, which is for large repairs or improvements, homeowners may borrow up to $25,000 for up to 20 years. Mini-PHIL loans provide up to $10,000 for emergency repairs or small projects. For both products, no equity in the property is required, and there are no fees.
"Freddie Mac believes that the single most effective way to prepare consumers for homeownership is to educate them on the importance of using credit wisely. Establishing and maintaining good credit is essential for building a sound financial future and preparing consumers for the responsibilities and benefits of homeownership," said Preston Lee, Freddie Mac's director of corporate relations and housing outreach. "Since its launch, the Don't Borrow Trouble initiative has not only exposed hundreds of thousands of consumers to fundamentals of understanding, obtaining and maintaining good credit but has also helped homeowners avoid scams and resolve financial difficulties they may be experiencing."
Details: For more information on how to bring the Don't Borrow Trouble campaign to cities, visit www.dontborrow trouble.com.
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|Publication:||Nation's Cities Weekly|
|Date:||Jul 21, 2008|
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