An Illinois woman outside her foreclosed home.

(WOMENSENEWS)–In the face of a mounting mortgage foreclosure crisis, financial advocacy groups are helping homeowners avoid further predatory lending practices and foreclosure auctions.

One effort began in June in Philadelphia, where the Court of Common Pleas now requires that mortgages of all owner-occupied properties scheduled for sale by the sheriff’s office be reviewed by borrowers, lenders and the courts before they can be sold.

"Many of these owners were women who never should have gotten subprime loans in the first place," said John Dodds, director of the Philadelphia Unemployment Project, a nonprofit that helped establish the city’s program to curb foreclosures. "Of the 552 homes referred to the program that had been scheduled for sheriff’s sale from April to July, 230 were permanently removed from sale and 200 others had their sales postponed from one to five months for a 78 percent success rate."

A gender analysis of 10 million mortgages granted in 2007 conducted at the request of Women’s eNews by the Chicago Reporter, an investigative magazine that covers the Chicago area, suggests foreclosure-curbing programs could disproportionately benefit female homeowners across the country.

Originally designed to help borrowers with less than sterling credit gain a foothold in the housing market, subprime loans carry interest rates of at least 3 percentage points over the rate of U.S. Treasury bonds. The added percentage points can mean hundreds of additional dollars in monthly payments, increasing the risk of foreclosure.

Jasmine Brewer, director of housing counseling at the Interfaith Housing Center of the Northern Suburbs in Winnetka, Ill., estimates that over 30 years, a subprime loan costs an average of $85,000 more than a traditional mortgage, which makes it difficult for women to save for their children’s education or their own retirements.

The Chicago Reporter analysis, released in October, found that while far more men than women signed mortgages, those women who did take out mortgages were almost twice as likely as men to receive subprime loans in large cities like Detroit and Milwaukee as well as small towns like Jacksonville, N.C., (population 72,254) and Bismarck, N.D. (55,532).

Millions of Homes in Foreclosure

The number of foreclosures increased 81 percent in 2008 from the previous year, according to data released Thursday by RealtyTrac, a research firm in Irvine, Calif. In 2009, an estimated 2.2 million households with subprime loans will foreclose, according to the Center for Responsible Lending. The Durham, N.C., think tank, which highlights abusive financial practices, predicts that the current foreclosure crisis will be the worst since the Great Depression.

On Jan. 12, President-elect Barack Obama called upon President George W. Bush to submit a request to Congress to release the remaining $350 billion in the financial bailout. Obama wants it to be available quickly after Inauguration Day, enabling some of the money to be spent on helping people avoid foreclosure.

House Financial Services Chair Barney Frank, D-Mass., announced Jan. 9 that he intends to introduce a bill to allocate $40 million of the financial rescue package known as TARP (Troubled Asset Relief Program) for foreclosure mitigation.

 Some subprime borrowers did not understand loan terms.

On Jan. 8 the Washington-based Association of Community Organizations for Reform Now, the nation’s largest community organization of low- and moderate-income families known as ACORN, announced a push to stop foreclosure auctions in over 20 cities.

The effort will canvass neighborhoods with high foreclosure rates to inform borrowers of their options and sponsor rallies to urge owners in foreclosure to remain in their homes. The group is now seeking volunteers through its Web site and local chapters.

"Banks recognized that women who were buying their first homes were a huge source of new clients," said Brewer from the Interfaith Housing Center.

"Although many women in our area could have qualified for traditional 30-year mortgages, they were unsophisticated about financial products and didn’t question the loan officer’s assertion that their credit score or debt-to-income ratio was inadequate," Brewer said. "They agreed to subprime loans because they were eager to buy a home in an area that had good schools or was close to their jobs."

Women More Likely to Pay More

For the fourth year in a row, the Chicago metropolitan area, according to the Chicago Reporter’s data analysis, led the nation in high-cost loans by volume with 60,148. About 22 percent of female borrowers received subprime loans compared to 17 percent of male borrowers.

Originally designed to compensate banks with higher interest for taking on a small number of high-risk borrowers in the 1990s, subprime loans proved to be highly profitable for lenders. After 2000, banks began marketing them to a wider range of borrowers.

"Phone solicitors talked hundreds of female homeowners in New Jersey who had safe, fixed-rate loans or no mortgages into taking out subprime loans," said Gwen Orlowski, director of the division of elder advocacy of the New Jersey Department of the Public Advocate in Trenton. "Many women agreed to these loans because the New York metropolitan area is an extremely expensive place to live, and they needed money to pay off medical bills, finance home repairs or send their children or grandchildren to college."

Lenders added features to these loans: exploding adjustable rates, balloon payments and penalties for early repayment hindering borrowers’ ability to repay.

"A woman might start out with a monthly payment of $800 and see that payment escalate to $1,200 after a year and $1,700 after two years," said Orlowski, who led in 2002 the anti-predatory lending unit of Legal Services of New Jersey, the Edison-based nonprofit organization that provides free legal assistance for low-income people. "Many women soon found themselves spending 70 to 90 percent of their meager incomes on subprime loans."

Elderly and Low-Income Hit Hardest

Elderly widows living on Social Security or middle-aged single women trapped in low-income jobs were the hardest hit, Orlowski added.

"We had clients who went without food and stopped taking their prescriptions because they were so desperate to hold on to the homes they had inherited from family members and where they had lived all their lives."

The Chicago Reporter analysis found that African American women and Latinas were more likely to receive high-cost loans than their white female counterparts and Asians. More than 35 percent of mortgages to black women were high-cost loans, the highest percentage of any demographic group.

Instead of a personal banker who represented their interests and helped them obtain the most appropriate loan, many women of color relied on mortgage brokers who earned lucrative commissions based on the interest payments built into the mortgage structure from lenders for selling subprime loans, even if applicants qualified for a lower rate.

In Wisconsin, chapters of the League of Women Voters are lobbying state lawmakers for a ban on these commissions as well as legislation that would establish home ownership classes for first-time buyers. They also want requirements that mortgage brokers pass competency tests and complete continuing education courses.

"Subprime loans and gender discrimination will receive more attention," predicted Dorothy K. Dean, chair of the lending practice study committee of the League of Women Voters of Milwaukee County, which prepared the recommendations that were approved by the state league in June. "The most important lending issue is not denial of credit but the terms of credit."

Sharon Johnson is a New York free-lance writer.

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Women’s eNews welcomes your comments. E-mail us at [email protected].