Stay Informed!

Ira and Hazel Cheatham purchased their Portland, Oregon home in 1983.

Ira and Hazel soon got a call from the lending institution urging the elderly couple to consolidate this loan, along with all their credit card debt, into a single mortgage. According to Ira, the financial institution promised that the couple would receive an interest rate that would reduce their monthly mortgage payments. In fact, the loan actually contained an annual percentage rate twice the promised rate. Additionally, the cost of 10 “discount points” — a charge of 10% of the loan balance — was financed into the loan, inflating the amount and stripping away the Cheathams’ equity.

Finding that their monthly mortgage payments had increased sharply under the new loan, the Cheathams decided to refinance their mortgage with another lender to obtain the 5% interest rate for which they qualified. However, the couple was required to pay an additional prepayment penalty of approximately $7,500 to the first financial institution in order to escape their predatory loan.

Unlike many other states, Oregon currently does not have any laws that establish norms and standards against predatory lending. The Cheathams could have been helped by limits on predatory practices and fees that trap subprime borrowers in high-cost loans. In addition to those limits, effective state legislation to curb predatory lending can prevent abusive refinances that strip homeowners’ wealth. States can also ensure that homeowners have a right to pursue meaningful remedies and defend their homes against foreclosure even after their loan has been sold.