America: land of the free… but in debt

October 9, 2007

Oh. My. God. Predatory lending everywhere I look in this country, the United States of America.

I’m certain you’ve seen news left and right on subprime lending. Some focus on the turmoil it’s causing on the financial market.

Others on the mortgage companies themselves getting into a bit of trouble because of their abuse of position that they practiced.

…potential borrowers were often led to high-cost and sometimes unfavorable loans that resulted in richer commissions for Countrywide’s smooth-talking sales force, outsize fees to company affiliates providing services on the loans, and a roaring stock price that made Countrywide executives among the highest paid in America.

But I’d like to bring your attention to the little guy. You know the one who doesn’t have a fancy financial degree. And whose house is being foreclosed at never-before-seen levels, all across the country.

Worcester and four other Massachusetts counties saw home foreclosures increase by at least 80 percent during the last 12 months, according to ForeclosuresMass.com.

Sylwia Kapuscinski for The New York Times

Gretchen Morgenson, NYTime business reporter, who in my opinion is best covering the crisis, seems to believe that there is no immediate hope for these family losing homes in the foreseeable future.

Such painful, personal and financially damaging tugs of war between lenders and borrowers are likely to continue for quite some time. As the home mortgage boom of recent years continues to deflate, hundreds of thousands of borrowers are facing escalating monthly bills on adjustable-rate loans that are either in foreclosure or near it.

A tragedy, certainly. But I’d like to also bring your attention to the pattern of predatory lending in other areas. First, the student loans.

Policy makers and regulators say that there are dangerous parallels between the private student loan and subprime mortgage markets. In both, there have been phenomenal profits, aggressive marketing and, until the recent credit market turmoil, a healthy appetite from Wall Street investors. And, as was seen in the subprime market, many student loans that were made in the last couple of years are resetting at much higher rates.

Here’s a graphic to better help you understand specifically the process behind this type of lending (who makes money, where it comes from, how much, so on and so on).

Next. We take a look at how these sharks prey on folks who just did time and are looking to start a new life.

The study, “Repaying Debts,” describes cases of newly released inmates who have been greeted with as much as $25,000 in debt the moment they step outside the prison gate.

And they must take the offer because various state run departments charge the ex-incarcerated for just about everything.

The corrections system buries inmates in fines, fees and surcharges that can amount to $10,000 or more. According to the Justice Center study, for example, a person convicted of drunken driving in New York can be charged a restitution fee of $1,000, a probation fee of $1,800 and 11 other fees and charges that range from $20 to nearly $2,200.

In some jurisdictions, inmates are also billed for the DNA testing that proves their guilt or innocence, for drug testing and even for the drug treatment they are supposed to receive as a condition of parole. These fees are often used to run the courts, the sheriffs’ offices or other parts of the corrections system.

A former inmate living at or even below the poverty level can be dunned by four or five departments at once — and can be required to surrender 100 percent of his or her earnings.

So what do you think happens to the fella that can’t pay a dime because of no money in his pockets? (You know he wasn’t working right?) And has no education? (Likely the reason he was in prison in the first place)? You guessed it. Back to the pen.

But we don’t care about them, right? I mean I’m tired of hearing circumstances this, and circumstances that baloney. A man makes his own decision in life. And chooses his own path.

Chances are if any of above mentioned doesn’t affect you intimately, you might not be as concerned. But get this: if you have a credit card, then you might be a victim of these credit monsters. PBS’ Frontline did a real nice documentary on, this, worst kind of lenders.

If the issue still doesn’t bother you, then god speed. Really. Do realize, though, unless you’re filthy rich, you or your offspring will have to pay up for the biggest borrower of all: the U.S. government.

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