Predatory Lending Suit Brought by Texas Woman
By: Gerri L. Elder
An African-American woman from suburban Houston has filed a federal lawsuit against Alpha Mortgage USA Inc. and American Home Mortgage Servicing Inc. She alleges that the mortgage companies engaged in a racially-targeted predatory lending practice called "reverse redlining," according to a report by the Associated Press.
Nanette Lewis alleges that she refinanced the adjustable rate mortgage on her family's first home purchase, but was victimized by a loan with ridiculous and outrageous hidden terms because she is black. Lewis wants the lien removed from her property and would like for others to be informed about what she has been through.
Lewis' lawsuit is unique and may be the first time in Texas that a homeowner has sued over predatory lending. The attorney general of Massachusetts and the city of Baltimore have previously filed similar lawsuits against mortgage companies. All of these lawsuits allege that the lenders have used the "reverse redlining" tactic to target minority loan applicants for the bottom of the barrel mortgage deals.
Lewis says that during her mortgage loan closing in 2006, she and her husband were told about last-minute changes in the deal. When she asked about the changes, she was told not to worry, that her loan would be refinanced later.
Later, Lewis was laid off from her job and went to Lone Star Legal Aid to ask for help in order to avoid foreclosure. At that point, she learned the legal impact of the mortgage loan documents that she was rushed into signing.
The home was valued at approximately $156,000, but the mortgage was for more than $175,000. Also buried in the legal documents was $17,654, or 10 percent, in points and fees and a whopping $103,000 balloon payment due in 30 years.
Lewis' lawsuit cites the federal Home Ownership and Equity Protection Act and the Texas Constitution. Both bar lenders from excessive points and fees and from making certain changes in loan terms at closing. Points and fees of more than 8 percent are considered excessive.
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