Text-A-The-Lending-Crisis-as-Crack-Epidemic.doc

Unit Two Economics Text A The Lending Crisis as Crack Epidemic1 The mortgage lending crisis “is the most serious problem that has faced this country since crack cocaine,” the Brooklyn district attorney, Charles J. Hynes, told a group of about 60 residents of the Canarsie neighborhood Monday night.2 “When crack cocaine attacked the poor, it wasnt very, very long before crack cocaine was the engine (that drove the crime rate through the roof),” Mr. Hynes said at a town hall meeting at the Hebrew Educational Society building, co-sponsored by Councilman Lewis A. Fidler, Assemblyman Alan Maisel and Assemblywoman Helene E. Weinstein. “Similarly, the attack (on the poor (who are in danger of losing property) has the same kind of effect on property values and on the markets whether its the real estate markets or the Wall Street markets.”3 Mr. Hynes said the problem became apparent to him and his colleagues about 18 months ago. “It became clear to us that we were on the brink of a profound tragedy in this country,” he said.4 He added, “The frightening thing for me was to recognize that it is so difficult to prosecute these cases predatory lending, subprime lending.”5 Unless there is fraud, many of the predatory lending practices fall under the category of bad business practices, not criminal acts. Homeowners can pursue lawsuits, but Mr. Hynes and the other officials said they were hoping to educate Brooklyn residents about the warning signs for potential problems in obtaining a sustainable mortgage.6 Mr. Hynes said he hoped to convince Brooklyn residents “that youve got to be scared out of your wits and that tonight you make a firm commitment that you will never be involved in a lending agreement unless you have a lawyer representing you.”7 Mr. Hynes also called for more government action to protect people (who are in danger of losing their homes). “Certainly across the country we did something many years ago when Chrysler was nearly going belly up,” Mr. Hynes said. “If we can bail out Chrysler we should bail out our citizens. But weve got to come up with something to do that.”8 One Canarsie resident, Ivy Green, held up a plastic bag (filled with her mortgage payment records) and took the microphone to tell her foreclosure experience. She said she had sent her payments to the mortgage service company every month but that the company did not credit her account and then sent the payments back to her. The company then began foreclosure proceedings, she said.9 “I do not owe one red cent,” she said. “Im so angry. I cant sleep well at night.”10 Ms. Green said that she was fighting the foreclosure and that she had hopes that she would prevail. But she added that the stress of the situation has taken a toll on her health.11 Richard Farrell, an assistant district attorney, said: “This actually illustrates some of the gray area here. A servicer not properly crediting your payments doesnt qualify as a criminal act (that Im aware of). Its a bad business practice. You can sue them for damages and whatnot. But of course thats time, thats money. But still thats something you have to be on top of. As soon as you see a problem you need to address it right away.”12 Other mortgage problems (that were mentioned) included adjustable rates (that put payments out of reach for home owners), refinancing arrangements (that increase the mortgage payment), and consolidation plans (that require the homeowner to sign over the deed to the investor). 13 A similar forum will be held at the Hope Gardens Senior Center in Bushwick at 7 p.m. Wednesday night.