The city’s effort to stem police misconduct is falling short, leaving abusive officers to operate with near impunity.
DonateSubscribeFollow Us On TwitterFacebook RSS Feeds
The Real Cost of High-Cost Lending
In one Chicago census tract in the largely African-American Roseland neighborhood, at least 80 percent of applicants received high-cost loans in 2006.
In March 2006, when Lillie Taylor bought her corner house on 109th Street for $99,000, her initial mortgage rate was 11 percent–"more than twice the federal prime rate at that time.
Her case was far from unique in Roseland, a South Side Chicago community area.
According to a Chicago Reporter analysis of federal mortgage lending data, 78 out of 89 people who got conventional, home-purchase loans in 2006 for properties in the Roseland census tract where Taylor lives got high-cost loans–"and the median interest rate for those loans was a whopping 10.38 percent.
Among the more than 1,000 census tracts in the Chicago Metropolitan Statistical Area where more than 100 mortgages were granted in 2006, Taylor's census tract had the highest percentage of high-cost loans, according to the Reporter's analysis of home purchase, home improvement and refinance loans granted in 2006. In all, 143 of the 172 mortgage loans originated there in 2006, more than 83 percent, were high-cost loans–"meaning the loans were at least three percentage points above the U.S. Treasury standard at the time. In 2006, for 30-year mortgages, the median standard rate was 4.92 percent.
The higher interest rates result in higher monthly payments, sometimes hundreds of dollars more.
The figures for Taylor's census tract–"which is bordered by 103rd Street, State Street, 111th Street and Stewart Avenue–"did not surprise Chris Smith, neighborhood director for Neighborhood Housing Services of Chicago's Roseland office. Smith believes "Roseland had the highest foreclosure rate in the country back in the –˜80s."
With so many new owners in the neighborhood getting high-cost loans, some are prone to think there is a plot "to keep low-income people down," as argued by Letitia Johnson, an African American woman who purchased a house last year in the same Roseland census tract where Taylor lives. "A lot of people are being ripped off in this area. [The mortgage companies] know that people want their house, especially my race of people because they are going to pay high rents anyway," she said.
While she is one of the few 2006 buyers who did not get a high-cost mortgage–"the interest rate on her mortgage was 6.5 percent–"Johnson still feels preyed upon by predatory lenders.
In late September, Johnson received an unsolicited phone call from a mortgage company representative who claimed to know that she wanted to refinance her mortgage–"which is not the case, Johnson said. She was furthermore stunned to learn that the caller knew everything about her mortgage, her house and her medical information, including the fact that she had recently had surgery. Suspicious, Johnson abruptly hung up. She said the story exemplifies mounting aggressive lending practices.
"Lack of education" is the major cause of predatory lenders' success in the area, said Smith. "A very vital part of turning the high-cost mortgages around is educating homeowners about what it takes to own a house."
In order to help people make sound home purchase and refinancing decisions, Neighborhood Housing Services of Chicago holds ownership classes every Wednesday in Roseland. Smith said about 50 people attend the classes. After attending four classes, participants receive a "Home Ownership Certificate." The organization also holds weekly classes in three other neighborhoods.
But the impact of high-cost loans extends beyond individuals. The higher mortgage payments increase the risk of foreclosure and limit homeowners' ability to fix up their properties, according to Smith. As a result, boarded-up and dilapidated properties diminish property values and attract gangs. "People tend to loiter around these properties, hanging out on stairs –¦ and it leads to illegal activity. That all translates into a lot of issues pertaining to the attractiveness and marketability of a particular neighborhood or block," he said.
Even though she eventually managed to get her mortgage refinanced at a lower rate, Taylor plans to move. "It's a slum neighborhood," she said.
Her case was far from unique in Roseland, a South Side Chicago community area.
According to a Chicago Reporter analysis of federal mortgage lending data, 78 out of 89 people who got conventional, home-purchase loans in 2006 for properties in the Roseland census tract where Taylor lives got high-cost loans–"and the median interest rate for those loans was a whopping 10.38 percent.
Among the more than 1,000 census tracts in the Chicago Metropolitan Statistical Area where more than 100 mortgages were granted in 2006, Taylor's census tract had the highest percentage of high-cost loans, according to the Reporter's analysis of home purchase, home improvement and refinance loans granted in 2006. In all, 143 of the 172 mortgage loans originated there in 2006, more than 83 percent, were high-cost loans–"meaning the loans were at least three percentage points above the U.S. Treasury standard at the time. In 2006, for 30-year mortgages, the median standard rate was 4.92 percent.
The higher interest rates result in higher monthly payments, sometimes hundreds of dollars more.
The figures for Taylor's census tract–"which is bordered by 103rd Street, State Street, 111th Street and Stewart Avenue–"did not surprise Chris Smith, neighborhood director for Neighborhood Housing Services of Chicago's Roseland office. Smith believes "Roseland had the highest foreclosure rate in the country back in the –˜80s."
With so many new owners in the neighborhood getting high-cost loans, some are prone to think there is a plot "to keep low-income people down," as argued by Letitia Johnson, an African American woman who purchased a house last year in the same Roseland census tract where Taylor lives. "A lot of people are being ripped off in this area. [The mortgage companies] know that people want their house, especially my race of people because they are going to pay high rents anyway," she said.
While she is one of the few 2006 buyers who did not get a high-cost mortgage–"the interest rate on her mortgage was 6.5 percent–"Johnson still feels preyed upon by predatory lenders.
In late September, Johnson received an unsolicited phone call from a mortgage company representative who claimed to know that she wanted to refinance her mortgage–"which is not the case, Johnson said. She was furthermore stunned to learn that the caller knew everything about her mortgage, her house and her medical information, including the fact that she had recently had surgery. Suspicious, Johnson abruptly hung up. She said the story exemplifies mounting aggressive lending practices.
"Lack of education" is the major cause of predatory lenders' success in the area, said Smith. "A very vital part of turning the high-cost mortgages around is educating homeowners about what it takes to own a house."
In order to help people make sound home purchase and refinancing decisions, Neighborhood Housing Services of Chicago holds ownership classes every Wednesday in Roseland. Smith said about 50 people attend the classes. After attending four classes, participants receive a "Home Ownership Certificate." The organization also holds weekly classes in three other neighborhoods.
But the impact of high-cost loans extends beyond individuals. The higher mortgage payments increase the risk of foreclosure and limit homeowners' ability to fix up their properties, according to Smith. As a result, boarded-up and dilapidated properties diminish property values and attract gangs. "People tend to loiter around these properties, hanging out on stairs –¦ and it leads to illegal activity. That all translates into a lot of issues pertaining to the attractiveness and marketability of a particular neighborhood or block," he said.
Even though she eventually managed to get her mortgage refinanced at a lower rate, Taylor plans to move. "It's a slum neighborhood," she said.
