Many of these changes have resulted in positive benefits for home buyers and homeowners. At the same time, however, a new set of problems has arisen that are impacting these and other communities. A set of changes in the financial services industry has increased the ability of predatory mortgage lenders and brokers to exploit vulnerable homeowners. The packing and financing of unnecessary fees Flipping or overly frequent refinancing with repeated fees being rolled into the loan, resulting in increasing debt and reduced owner's equity Lending to borrowers with insufficient income to afford the loan, driving the homeowner into foreclosure Community organizations, consumer advocates, and even many responsible lenders have become increasingly concerned about the predatory lending problem. Victims become so entangled in debt that they are no longer eligible even for specialized community development finance programs.
Families see their disposable income swallowed by excessive loan payments and fees.
With increased foreclosures and abandoned properties, there is now physical evidence of the toll that predatory lending takes on neighborhoods. Blocks are devastated by the scourge of abandonment. These problems quickly spill over into a worsened climate for investment in home repair and upkeep, creating a cycle of disinvestment. In recent years there has been tremendous growth in the number of mortgage loans made by lenders specializing in lending to borrowers with subpar credit histories. These subprime lenders are often mortgage companies, but can also be thrifts or even banks.