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Doug Krizner: We’ve heard the stories of bad lending practices in subprime mortgages. In Congress, a bill to protect borrowers is making its way through the House and legislators in some 30 states have introduced bills targeting deceptive lending. But for many it’s too late. Steve Tripoli has the story of once such case.
Steve Tripoli: Bob and Mary sit in their home near the Massachusetts coast and wonder how much longer they can stay there.
The retired couple won’t let us use their full names because they’ve taken their mortgage lender to court.
Bob thought their monthly mortgage payment would never rise much beyond its original $1,289.
Bob: And that’s the way I understood it. I didn’t know we were gonna go from $1,289 up to $1,600 up to $1,800 in a matter of six months.
Mary thought they’d landed a fixed-rate, but on closing day the lender’s lawyer told them they hadn’t qualified and they had to take an adjustable rate instead.
The couple had taken out the mortgage because they needed cash to pay off medical and other bills. They felt they had no option but to sign.
Mary: I had already told people that this mortgage was going through and that payment would be three days after we signed the mortgage. And I felt like at that late date, I couldn’t cancel or anything.
Andrea Bopp Stark is Bob and Mary’s lawyer. She says this kind of bait-and-switch is common in the mortgage game these days.
She’s going after the lender for not telling Bob and Mary they were signing up for what Massachusetts law calls a “high-cost loan.”
Andrea Bopp Stark: The illegal part of this is that there are certain disclosures that need to go along with a high-cost loan, including the fact that this may not be the best rate you can get and you should shop around.
Lynn Drysdale is a consumer law expert at Jacksonville Legal Aid in Florida. She says these and other kinds of tactics by lenders are rampant around the country.
Lynn Drysdale: Inflating appraisals, falsifying loan applications, giving people loans with prepayment penalties that are hidden. And these are nationwide lenders that most people would think have an air of respectability.
Drysdale says payday lenders, auto lenders and others are also crossing the legal line more often, but federal agencies are starting to crack down on rogue lenders. And around the country state attorneys general have been on the move.
Back in Massachusetts Mary and Bob sit in a house full of packed boxes. They’re in foreclosure but hope to settle that case. They say they don’t know what they’ll do if those boxes have to be loaded onto a moving van.
I’m Steve Tripoli for Marketplace.
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