Statewide Don't Borrow Trouble(R) Alaska Campaign Launched to Help Consumers Avoid Predatory Lending

Nov 16, 2005, 00:00 ET from Freddie Mac

    ANCHORAGE, Alaska, Nov. 16 /PRNewswire/ -- At an Anchorage Board of
 Realtors luncheon here today, a coalition of 31 private and public
 organizations, including the U.S. Department of Housing and Urban Development,
 AARP Alaska, Anchorage Neighborhood Housing Services, Fairbanks Neighborhood
 Housing Services and Freddie Mac (NYSE:   FRE), launched a major statewide
 public education campaign aimed at preventing predatory lending practices in
     Also included in that coalition are the Municipality of Anchorage, the
 City of Fairbanks, the City of North Pole, and the Fairbanks North Star
 Borough (see end of release for a complete list of organizations).  The
 coalition has established a toll free consumer help line that will be staffed
 by trained professionals who can offer free assistance to individuals seeking
 information about purchasing a home, refinancing, consolidating debt, taking
 out a home-equity loan, and mortgage foreclosure prevention.  Individuals can
 also be referred to appropriate legal or financial experts.
     The coalition urges consumers to call the Don't Borrow Trouble(R) Alaska
 help line -- at 888-925-2521 -- that will be staffed by trained professionals
 who can offer free assistance to individuals seeking information about
 purchasing a home, refinancing, consolidating debt, taking out a home-equity
 loan, and for mortgage foreclosure prevention.  Individuals can also be
 referred to appropriate legal or financial experts.
     The Don't Borrow Trouble Alaska campaign also uses brochures, a website at, radio and television public
 service announcements and workshops throughout the state to educate consumers
 who are most vulnerable to predatory lending practices, including the elderly,
 minorities and low- to moderate-income individuals.  By combining advertising
 and face-to-face consumer education and housing counseling, the campaign helps
 consumers avoid abusive lending practices, such as exorbitant interest rates,
 excessive fees and pressuring tactics.
     "We hope people will use these resources that we've put in place before
 they get into financial problems," said Anchorage Mayor Mark Begich.  "The
 website, which the Municipality is hosting, is a resource for those who want
 to find out more about predatory lending practices and how to avoid them."
     "Predatory lending practices hurt borrowers, certainly, but they also hurt
 other lenders, and they hurt our communities," said Colleen Bickford,
 Anchorage field office director for the U.S. Department of Housing and Urban
 Development.  "For the past six years, HUD has been actively involved in
 combating predatory lending through regulation, consumer education and
 enforcement actions against lenders, appraisers, real estate brokers, and
 others that have victimized homebuyers.  Homeownership is a vital step for
 families to build assets.  We want those families to know as much as possible
 before beginning the homebuying process, so they can avoid those unprincipled
 lenders and brokers."
     "Predatory lending practices attack the heart of our communities.  These
 practices can strip away home equity and trap unwary borrowers in a dismal
 cycle that ultimately replaces homeownership with foreclosure," said Craig
 Nickerson, vice president of expanding markets for Freddie Mac.  "Don't Borrow
 Trouble is a proven method to help stop predatory lending, keep families in
 their homes, build wealth and strengthen communities.  These 31 organizations
 should be commended for banding together and combining their resources to
 educate consumers on the perils of predatory lending practices."
     Predatory lending practices strip equity away from homeowners, by
 repeatedly refinancing a loan within a short period of time and charging high
 points and fees with each refinance; packing a loan with single premium credit
 insurance products like credit life insurance, and not adequately disclosing
 the inclusion, cost or any additional fees associated with the insurance; or
 charging excessive rates and fees to a borrower who qualifies for lower rates
 and fees.
     Pioneered in Boston by Mayor Thomas M. Menino and the Massachusetts
 Community and Banking Council, Freddie Mac is the principal sponsor of Don't
 Borrow Trouble's expansion throughout the United States.  Freddie Mac has
 brought the campaign to 40 locations across the country, and has received more
 than 100,000 inquiries to the Campaign's help line.
                      Tips For Avoiding Borrowing Pitfalls
                              Source: Freddie Mac
     Say NO to "easy money."  Borrowers should beware if someone claims "credit
 problems won't affect the interest rate."  Avoid solicitations for loans that
 sound too good to be true.  If it sounds too good to be true, it probably is.
 If a solicitation is really interesting, get it in writing!
     1. Shop around.  Borrowers should talk to several lenders to find the best
        loan for which they qualify.  A loan product or lending practice may
        not seem predatory until compared with a similar loan product offered
        by other lenders.
     2. Understand the loan terms.  Borrowers should compare loan terms from
        different lenders.  Understand the best loan terms available in the
        marketplace and compare the APR (annual percentage rate) of loans from
        different lenders.  The APR takes into account both the interest rate
        and the points and fees of the loan.  A nonprofit housing counselor or
        a lawyer can review the information with a borrower
     3. Find out about prepayment penalties.  Borrowers should know if the loan
        offered to them has a prepayment penalty.  Prepayment penalty should be
        a choice, not a requirement.
     4. Make sure documents are correct.  Be cautious of someone who offers to
        falsify a borrower's income information to qualify for a loan.
        Borrowers should never falsify information or sign documents that they
        know to be false.
     5. Make sure documents are complete.  A borrower should not sign documents
        that have incorrect dates or blank fields.  Be wary of promises that a
        lender will "fix it later" or "fill it in later."
     6. Ask about additional fees.  Borrowers should question any items they
        didn't ask for.  Borrowers should also beware if they are told that
        single premium credit insurance is required get a loan, or that
        purchasing it will help loan approval.  Review every fee and compare
        different lenders' fees to ensure the most competitive loan terms.
     7. Understand the total package.  Ask for written estimates that include
        all points and fees.  The situation may not seem abusive until everyone
        gets to the closing table.  If any fees or charges differ from what was
        previously disclosed, delay the closing until all terms of the loan are
        clearly understood.
     8. Work with credit counselors.  A borrower should get all the facts
        before deciding to combine credit card or other debts into a home loan.
        Beware of scam credit counseling/ credit consolidation agencies --
        unfortunately, not all credit counseling agencies are acting in your
        best interests.  Talk to a community-based consumer credit counseling
        agency or housing counselor before signing the loan documents.
     9. Protect home equity.  If borrowers are taking equity out of their
        property, they should take out the minimum amount needed.  The equity
        in a home is a source of wealth, which builds up slowly over time.
     10. If you're not sure, don't sign! Get advice first! Talk to a community-
         based consumer credit counseling agency or housing counselor.
     Partner organizations of the "Don't Borrow Trouble Alaska" campaign
     AARP Alaska
     Alaska Association of Mortgage Bankers
     Alaska Association of Mortgage Brokers
     Alaska Housing Finance Corporation
     Alaska Legal Services
     Alaska Public Interest Research Group
     Anchorage Board of Realtors
     Anchorage Equal Rights Commission
     Anchorage Neighborhood Housing Services*
     Association of Alaska Housing Authorities
     City of Fairbanks
     City of North Pole
     Consumer Credit Counseling Services
     Cook Inlet Housing Authority
     Cook Inlet Tribal Council
     Fairbanks Neighborhood Housing Services
     Fairbanks North Star Borough
     Federal Trade Commission
     Freddie Mac
     Habitat for Humanity
     Municipality of Anchorage
     RurAL CAP
     State of Alaska Division of Banking & Securities
     State of Alaska Office of the Attorney General
     State of Alaska Office of Faith-Based & Community Initiatives
     The Better Business Bureau of Alaska, Oregon & Washington
     United Way of Anchorage
     U.S. Attorney's Office
     U.S. Department of Housing & Urban Development
     U.S.D.A. Rural Development
     YWCA of Anchorage
     * Anchorage Neighborhood Housing Services serves at the coordinating
 agency for Alaska's "Don't Borrow Trouble" campaign.
     Freddie Mac is a stockholder-owned company established by Congress in 1970
 to support homeownership and rental housing.  Freddie Mac fulfills its mission
 by purchasing residential mortgages and mortgage-related securities, which it
 finances primarily by issuing mortgage-related securities and debt instruments
 in the capital markets.  Over the years, Freddie Mac has made home possible
 for one in six homebuyers and nearly four million renters in America.

SOURCE Freddie Mac