Oakland City Attorney Announces Predatory Lending Fight

By J. Douglas Allen-Taylor
Friday October 19, 2007

The Oakland city attorney’s office this week announced a stepped-up effort to combat what City Attorney John Russo and Mayor Ron Dellums are calling the “crisis” of predatory lending in Oakland. 

They are kicking off the efforts with a homeowner’s foreclosure prevention workshop this Saturday, including a hotline for distressed consumers and homeowners operating out of the city attorney’s office, door-to-door public outreach in the most effected communities, meetings with lenders and loan service organizations to encourage them to mitigate mortgage paying problems before they occur and proposed state legislation. 

The “Know Your Options, Know Your Rights, Protect Your Home” workshop will be held from 9 a.m. to 12:30 p.m. this Saturday at Oakland City Hall. 

Flanked at a city hall press conference by members of a newly formed Oakland Fair Lending Coalition that included city and community leaders, Russo said that the city of Oakland had “worked too hard” over the last several years to increase home ownership and to attack the city’s growing problem of crime and violence.  

Russo said that not only do the foreclosures caused by predatory lending practices have a devastating effect on homeowners themselves that needs to be prevented, but that “we are not going to allow the city to slip backwards with a glut of abandoned houses that causes neighborhoods to de-teriorate and crime to flourish.”  

Members of the newly-formed Oakland Fair Lending Coalition include ACORN, Bay Area Legal Aid, the California Reinvestment Coalition, the Center for Responsible Lending, Centro De La Raza, the Consumers Union, the East Bay Community Law Center, the Eviction Defense Center, Housing and Economic Rights Advocates, Lao Family Community Development, the Oakland NAACP, the Oakland City Attorney’s Office, Sentinel Fair Housing, the Urban Strategies Council and the Unity Council. 

Russo stressed that the coalition did not want to “interfere with the fair market,” and that it was also interested in protecting investors, who, he said, have also been hurt by the home-mortgage collapse crisis. 

The city attorney’s office defined predatory lenders as those companies that use “misleading and high-pressure tactics” to entice homeowners into loans the homeowners cannot afford, and then foreclose on those properties when the mortgages cannot be paid.  

Of particular concern, according to coalition members who spoke at Thursday’s press conference, were adjustable interest rates that continue to rise past the homeowners’ income levels. 

Maeve Brown, executive director of the Oakland-based nonprofit, Housing and Economic Rights Advocates, the sponsors of Saturday’s workshop, said that nationwide, $110 billion in home-mortgage loans are expected to be adjusted upward in April of next year, more than the total in the first three months of this year.  

And a press release put out by the city attorney’s office said that there are currently 1,000 foreclosed, bank-owned properties in Oakland, and that “hundreds of default notices have been sent just this month.” 

Also appearing at the press conference and lending support to the effort were City Council President Ignacio De La Fuente and Councilmember Larry Reid, whose Seventh District has some of the worst housing-mortgage default problems in the city. 

A city attorney’s office fact sheet passed out at the press conference noted that there were 337 foreclosures in Oakland in the first eight months of 2007, with the 94621 zip code in East Oakland—a heavily African-American and Latino area represented by Reid—having the highest foreclosure rate in the city, at 14.9 foreclosures per 1,000 homes.  

The fact sheet said that citizens of color were most likely to be victims of predatory lending practices, with African-American and Latino homebuyers 3.8 times more likely to have received a high-cost loan than whites, and neighborhoods of color 23.6 times more likely to get higher-cost refinance loans than white neighborhoods. 

Dorothy Hicks, a homeowner for 39 years in the Havenscourt community of East Oakland and an ACORN member, said at the press conference that she took out a mortgage on her home a year ago to raise money to start a business, but said that she was a “victim of a predatory lender” and now in danger of losing her home. 

“I told the lender I was making a certain income, but he put a higher income on the loan papers,” Hicks said. “They can put anything on those papers they want. I would not have signed those papers if I knew the payments would go up every two or three years. I was told that it would be one rate.” Hicks said that after she approached her lender to say that she was having problems with making her payments and needed help, “they told me I wasn’t making enough to keep my house. But a year ago, they told me I was making enough to get the loan.” 

The Oakland City Council passed an ordinance in 2001 to protect low-income and elderly citizens from predatory lenders, but a 2005 California Supreme Court ruling threw out that legislation. Russo said on Thursday that because the court ruled that state law pre-empted city ordinance in this area, Oakland cannot pass a modified measure. 

Instead, Russo said the coalition would lobby the state legislature for revised state law that provides “real protection against predatory lenders,” including “vigorous enforcement.” Russo urged support for one current bill, AB 512 (Sally Lieber, D-Mountain View) that would require mortgage contracts to be written in the language in which they are negotiated. 

Russo said that such law is currently in place in California for all contracts except mortgages, a situation he called “ridiculous” and a significant problem in a multi-lingual city like Oakland. 

The city attorney added that “if the legislature doesn’t have the guts to act” on the predatory lending issue, “they should end their pre-emption over municipal ordinance and allow the local jurisdictions to act on our own to protect our citizens.” 

State Senate President Don Perata did not appear at Thursday’s press conference, but an aide read a statement from Perata that said the senator “look[s] forward to working with the Coalition and reviewing their legislative proposals, as I am working with my Senate colleagues to develop legislation to help protect homeowners against foreclosure.”