By Bob Negele
Recent news reports have been filled with ugly stories of predatory mortgage lending and the fallout from those adjustable rate, sub-prime loans.
The payments start low, then adjust upward-often dramatically-leaving the homeowner unable to keep up the payments.
The low initial payments haven't allowed the homeowner to build any equity, and often these loans carry pre-payment penalties, so refinancing is difficult or impossible.
The debate rages about whether consumers are to blame for not reading their mortgage agreements carefully enough or lenders are to blame for qualifying people based only on initial payments knowing that they won't be able to make the increased payments and often allegedly glossing over the future payment amounts.
But while the debate rages, foreclosure rates continue to mount. Various estimates put the foreclosure rate for sub-prime mortgages at anywhere between 12% and 20%, and there doesn't appear to be any relief in sight.
ConsumerAffairs.com recently turned the spotlight on a particularly ugly aspect of predatory lending and the subsequent foreclosures: the high incidence of foreclosure on the homes of senior citizens.
While at first glance this might seem particularly egregious simply because senior citizens are more vulnerable, have fewer options for rebuilding after losses, and may be losing what they've worked all their lives for, a closer look reveals something even more disturbing.
First, few senior citizens are purchasing their first homes with these adjustable rate or other sub-prime mortgage loans.
While younger people may enter into questionable mortgage loans in order to be able to purchase a home they would not otherwise be able to finance, senior citizens are much more likely to be refinancing homes they've made payments on for years.
That means they're not only losing long-time homes, but that existing equity is being stripped out of the home by the mortgage lender.
According to Consumer Affairs, senior citizens are disproportionately targeted by predatory lenders, and often convinced to take out loans much larger than they need-in some cases, loans in excess of the equity in the home, or even of its total value.
With no remaining equity, any minor setback can leave the homeowner without options.