Boy you just hate to see this.
The guiding principle of the nonprofit Habitat for Humanity, founded in 1976 to build affordable houses for underprivileged families, comes from the Old Testament: "If a brother living near you becomes poor, you must provide for him...do not make a profit on the goods you sell him." But that ethos doesn't carry over to the many banks, brokers, and mortgage servicing companies that deal with Habitat families and, increasingly, are profiting handsomely from the financially naive.
A good friend of mine used to say the only thing worse than a godless Communist was a godless Capitalist. It appears both could use a dose of ethics.
Here's an overview.
Consider it another consequence of the housing boom. Habitat families are able to buy their homes for much less than full market value. A decade of rising prices has made them wealthier--on paper. At the same time, many are strapped for cash and unsophisticated about credit. For freewheeling brokers and lenders eager for refinancing business, the combination couldn't be better. "Habitat borrowers have targets on their backs," says Michael Calhoun, president of the Durham, N.C. Center for Responsible Lending.
The unprincipled pursuit of money can be appalling. But the temptation for quick cash can be significant.
Many......families are being bombarded with offers to refinance out of 0% loans. Jordan Ash, director of the Financial Justice Center at the Association of Community Organizations for Reform Now, an advocacy group, says lenders are targeting Habitat families with phone calls, mailings, and even personal visits. Habitat affiliates in Indianapolis and Columbus, Ohio, say many clients are getting mail solicitations that look to be from Habitat but are not. "I probably get two phone calls a week," says Dawn Daniels-McNear of the Columbus affiliate.
Habitat does great work, but...
Habitat's focus is mainly on building. Most of the mortgage payments it collects go into a pool to fund more houses. But Habitat also sells scores of loans to banks and outsources to mortgage servicers, some of which impose draconian penalties if people fall behind. They "jam predatory costs and attorney's fees and interest at 18% into the debt," complains April Carrie Charney, a lawyer with Jacksonville Area Legal Aid Inc. in Jacksonville, Fla.
Maybe some 'credit counseling' would be advisable for HFH recipients.
Critics say Habitat, which is made up of autonomous affiliates, isn't set up to deal with homeowners' problems. In many cases, "Habitat makes the loan, and they're out of the picture," says Charney.
Hopefully, education of both the problems and the perpetrators will help.
Even so, refis still tempt families who don't realize how fast the fees and interest add up. "You can't get a better deal than 0%. There's absolutely no reason to refinance," says Chris Miller, senior vice-president for loan servicing at NovaStar Financial Inc. in Kansas City, Mo. The firm has launched a pilot program with Habitat to provide mortgage servicing, job counseling, and credit education for free.
This is a good thing.
Miller says many customers come for advice about refinancing, unschooled in the basics and unaware that they currently pay no interest. He says his team dissuades only 35% of them from refinancing. "Lenders are taking advantage of them," Miller says. "It defeats the entire purpose of the program."
Unfortunately, people sometimes don't care they're being taken advantage of. Cash in hand can trump long-term financial wisdom.
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