CHICAGO Fannie Mae announced that it will buy $5 million of refinancing loans to be made to help victims of predatory lending in Chicago and that it has joined an anti-predatory-lending task force.
Fannie said it will buy the loans to help the victims avoid foreclosure and build up equity. The loans are available to people who own single-family homes or two-flats and earn 80% or less of the areas median income.
MidAmerica Bank of Naperville, Ill.; Irwin Mortgage Corp. of Indianapolis; Marquette National Bank of Chicago; Bank One Mortgage of Indianapolis; and Countrywide Home Loans of Calabasas, Calif., are making the loans. The banks started taking applications within the last month, and the first loan is expected to close soon, a Fannie spokeswoman said.
Fannie is accepting mortgages for up to 95% loan-to-value. Any refinancing loan for which the borrower has less than 20% equity in the home will require mortgage insurance. Mortgage Guaranty Insurance Corp. of Milwaukee and United Guaranty Residential Insurance Corp. of Greensboro, N.C., are to underwrite the policies.
The refinancing program, part of Fannies five-year, $12 billion HouseChicago plan to finance affordable housing for 150,000 Chicago families, was created through a series of meetings and discussions with city officials, housing groups, lenders, and mortgage insurers.
Fannie also said it is teaming up with the National Training and Information Center, a Chicago housing organization, to create the Predatory Lending Intervention and Prevention Project, a task force that is to examine lending practices in 10 cities, including Cleveland and Indianapolis.
The task force is intended to help assess the impact of predatory lending on families in the 10 cities and to collaborate with lenders and others to find solutions, Fannie said. It is to explore various abuses and let participants discuss their experiences and share their successes.
These discussions are to be the foundation for developing innovative ways to stop predatory lending and provide affordable housing opportunities, Fannie said, with the help of local lenders, mortgage bankers, brokers, regulators, municipalities, and housing partners.
Abusive lending practices that target our neighborhoods must be stopped, said Rep. Jan Schakowsky, D-Ill., who is on the House Banking and Financial Services Committee and was an author of the Anti-Predatory Lending Act of 2000. (The bill did not pass.) The $5 million initiative and proactive partnership are important steps to help victims of predatory lenders in Chicago save their homes and to assist other families who are ready to participate in the American dream of homeownership.
Chicago was the first city in the nation to pass legislation requiring formal pledges by lenders not to engage in predatory practices.