By Teresa Dixon Murray
Reporter, The Plain Dealer, Cleveland, Ohio
All Michael Sims wanted was a $10,000 home equity loan to consolidate some bills. So the 43-year-old agreed last month to refinance the $55,000 Cleveland home he has owned for 21 years.
But now he realizes he made a costly mistake: His interest rate is 13 percent instead of the 8 percent he was promised. His mortgage broker packed in thousands of dollars in hidden fees. His monthly payment is $200 more than before. And that payment doesn’t even cover his taxes and insurance, which he was told would be included.
Sims has lots of angry questions. “But every time I’ve tried to call the broker, they say he’s not there, and he won’t return my phone calls.
“This guy pulled a fast one on me. Everything was a lie,” Sims says. “This is going to bankrupt me.”
Sims is one of hundreds of Greater Clevelanders who believe they have been scammed by fast-talking mortgage brokers.
Predatory lenders have been stalking neighborhoods throughout the United States virtually unchecked for the past several years, consumer advocates and legal experts say. Within the past 1 1/2 years, however, the practice has mushroomed into a crisis as largely unregulated mortgage brokers cash in on the confusion and mounds of paperwork surrounding a home loan.
“The predatory lenders are basically seducing people and ripping them off,” says Rachel Robinson, an attorney with the Ohio State Legal Services Association in Columbus.
No figures are available locally or nationally on the number of victims because authorities only know about consumers who call for help after they realize they have been duped. But virtually every major U.S. cities has tallied hundreds of complaints in just the last few months, and they know there are hundreds more who haven’t yet realized they were scammed.
Ned and Victoria Wilson of Cleveland didn’t know they had been gouged until last week – nearly two years after they mortgaged their paid-off house to repay bills. Ned, 75, admits he put too much trust in what a broker promised.
Today, the Wilsons owe $66,000 on what started as a $40,000 loan before all of the fees and charges were added in. Their Kinsman-area home is worth only $32,100.
Ned Wilson says he never realized he was committing to paying out $753 a month. His Social Security check is only $888. “My grandchildren drop me a dollar or two sometimes,” he says, shaking his head. “You could read these loan papers all day and not understand them. Nobody could be nicer than that guy. He was going to take me golfing.”