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Predatory lending is on the rise in Ohio, and that’s not good. It’s not good for our neighborhoods, and it’s not good for homeowners. Here to explain why the Buckeye State is ripe for predatory picking is Rachel Torchia, president of Gateway Title Agency.

Question: Can you remind us briefly what predatory lending refers to?

Answer: Predatory lending occurs when lenders give consumers loans, often with punitive terms, they have little or no ability to repay. Sometimes property values are falsely inflated to justify the loan, and consumers are often given false or misleading information.

Question: I understand some legislation in Ohio is making our state friendly for predatory lenders. What's going on?

Answer: The Ohio Senate passed a bill that was relatively toothless, and the Ohio House's version failed to improve and even worsened the scenario. Without getting too technical, they have defined damages from predatory lending to be so narrow that no one is going to prosecute lenders or the sellers involved.
Predatory lenders are really focusing in on For Sale By Owners-investors who buy a house, fix it up, and want to sell, houses from an estate, houses where the parent is moving into a nursing home, etc. Places where owners would be eager to sell or "dump" the house.

Question: Can you give us a real life example of a situation in which predatory lending came into play?

Answer: There was a landlady who was selling her property for $115,000, which was a fair price. She received an offer of $140,000 from a buyer, but she wouldn't have taken that home. $25,000 was going to go back to the company helping the buyer get the down payment.
We did some investigating and discovered that the money was going to a rehab company.although the home had already been rehabbed. And the name to be on the $25,000 check was that of the mortgage broker.
We refused to close the sale, and explained why to the seller. The seller, knowing that no seller has yet been prosecuted for participating in such a case, didn't care, wanting to be rid of the home. The next day, another closing company closed the deal.

Question: Who really gets hurt when predatory lending occurs?

Answer: In the example I just gave, the lender was the victim, because it was making a loan larger than it should have made. In many cases, the lender is in on the scam, and the individual buyer is the victim because he’s overpaying for the home.
The buyers are obviously harmed, but so are the neighborhoods. Many times no one ever moves into the homes, they are foreclosed upon, abandoned, torn down, etc.
At present, Ohio is ranked fifth among the states in foreclosures, and Cuyahoga County is ranked first among counties in Ohio. Predatory lenders are focusing in on first-ring suburbs (right now there's a big target on Euclid), but it can happen in any area, in any price range of homes. And with little to no prosecution, it's going to get worse.

Question: Who are the winners?

Answer: In my example, the mortgage broker that arranged for the loan made money. And in many situations, the lender is in on the scam and winds up with the house.

Question: What can we do to help?

Answer: The local chapter of the FBI is investigating predatory lending, and contacting them if you find yourself involved is appropriate.
Contact your state legislators. Let them know you want an effective law. 1-800-282-0253

Remember, when it comes to home selling, it can be a jungle out there. And like the jungle, when a predator pounces, somebody's bound to get eaten! Don't let a predatory lending scam take a bite out of you. To learn more about predatory lending, or to receive some free articles to further explain the issue, give Gateway Title a call. My thanks to Rachel Torchia.