BALTIMORE – Predatory mortgage lending grew from 8 percent to 14 percent of all refinanced mortgages in Maryland between 1998 and 2000 and has spread to every corner of the state, according to a study released Friday.
The Maryland AARP analysis of data from the Home Mortgage Disclosure Act found that subprime lending in Maryland overall is still below the national average of 20 percent, but that in many areas of the state the predatory lending average is much higher.
Subprime lending targets borrowers with bad credit histories, offering to refinance homes at extremely high interest rates, often with excessive fees and deceitful lending practices. In the worst cases, people can lose their homes to unscrupulous or high-pressure lenders.
“Subprime lending is on the rise in Maryland,” said Frank Bailey, director of AARP Maryland. The advocacy group for retired persons released the analysis to kick off its campaign against predatory lending.
“We are not here to make a blanket condemnation of subprime lending,” Bailey said. “Indeed many people with credit histories that are less than impressive, subprime lending is the often the only access that they have to the credit market.
“While we understand that not all subprime loans are predatory we also know that most predatory loans are subprime,” he said.
Often a predatory lender will impose unfair terms on borrowers who may lack the understanding of the complicated real estate and banking transactions. Additionally, predatory lending is often focused in the subprime borrower.
But the practice is not focused in any one area of the state, Bailey said.
“We have seen many communities, like here in Baltimore city . . . decimated and devastated by predatory mortgage lending abuses that are imbedded in subprime loans,” he said.
The AARP survey said that subprime loans make up more than 30 percent of the home refinancing loans in some areas of Baltimore.
The same is true in many parts of the Eastern Shore — including all of Somerset County — where the ratio of subprime refinance lending is 30 percent or greater.
Other areas experiencing higher than the national average ratio of subprime lending include communities in Garrett and Allegany Counties in Western Maryland and in Harford and Carroll Counties in the central part of the state.
The AARP program is aimed at educating homeowners about elements to look for in a home-equity loan, a home improvement contract, reverse mortgages and other areas where they could unwittingly be putting their homes at risk.
Maryland Attorney General J. Joseph Curran Jr. said his office is working to get $2.3 million in restitution for about 45 Baltimore-area homeowners who were victims of predatory lenders. But he lauded the AARP effort.
“Although we’re enforcing the law, it’s education that’s going to stop the problem,” Curran said.