Predatory lenders prey on consumers' lack of financial knowledge.  Knowing your rights and being informed are the best ways to protect yourself from financial ruin.

Foreclosure Facts

• Foreclosures affect entire communities: they devastate families, create abandoned properties, lower property values and dampen local economies.
• For the past 20 years, foreclosures in Hennepin County averaged between 1,000-1,500 per year.  In 2006, foreclosures doubled to more than 3,000.
• From 2003 to 2006, in the Twin Cities metro area, foreclosures increased 250 percent (about 2,000 to 7,000).
• Since January 2006, more than 2,500 Minneapolis homes were sold at sheriffs' foreclosure sales.

Subprime Lending—What You Need To Know

Subprime loans:

• Account for more than 20 percent of all new mortgages nationwide
• Are disproportionately made in low-income communities and communities of color
• Are driving predatory lending
• Are usually for people with blemished or limited credit histories
• Carry a higher interest rate than prime loans to compensate for increased credit risk
• Have a one in five chance of foreclosing (as of 2006)

Subprime lenders:

• Make more of their total profits on home refinance loans than prime lenders
• Are more likely to use "consumer," "finance" and / or "acceptance" in their lender name

Beware Of

• Adjustable rate mortgages (ARMs)
• High interest rates and fees
• High loan-to-value (borrowing more than 80 percent of the home's value)
• Inflated appraisals
• Prepayment penalties
• Small monthly payments with a large balloon payment at the end

Preventing Foreclosure Tips

• Ask your lender or broker to explain any fees.
• Contact your lender or a mortgage foreclosure program if you're behind on your payments.
• Don't be pressured into signing a loan document.
• Have a lawyer or housing counselor review your documents, especially for a refinance loan.
• Know your rights. New legislation was passed to further protect Minnesota consumers.  Read a summary of the new anti-predatory lending law.
• Make sure the agency or broker is licensed by the Minnesota Department of Commerce.
• Make sure you can afford all your payments throughout the entire life of the loan.  Special teaser rates may jump significantly after just a short time.
• If you've already foreclosed, be very cautious of "investors" offering to "save" your home.

Resources

• Better Business Bureau: 651-699-1111
• FamilyMeans: 651-439-4840
• Federal Trade Commission (Consumer Protection): 1-877-FTC-HELP
• FHA Resource Center: 800-225-5342
• HUD National Servicing Center: 888-297-8685
• Legal Services Advocacy Project: 651-222-3749
• Minnesota Attorney General's Office: 651-296-3353
• Minnesota Department of Commerce: 651-296-2488
• United Way 2-1-1™
  This free and confidential 24-hour information/referral line can connect you to over 40,000 community resources.  Just dial 2-1-1.  Cell phone users can call 651-291-0211.

Sources: MN Attorney General's Office, U.S Department of Housing and Urban Development (HUD), Legal Services Advocacy Project