Many of those subprime mortgage-holders actually qualified for lower-interest, market-rate mortgages. “The majority of loans made in the Northwest Bronx are subprime loans,” says Howard Banker, vice president for programs at Parodneck. Most borrowers, though, “are much better credit risks than the rate on their loans would indicate.” Lenders heavily advertise these loans, emphasizing that they can be secured quickly; borrowers often don’t realize they qualify for lower rates.
So in the spirit of the recent refinancing boom, Parodneck and a coalition of Bronx nonprofits are launching an initiative this fall to help people paying high interest on subprime loans refinance into market-rate conventional loans. In the process, the community groups will be competing head to head with subprime lenders
The Northwest Bronx Fair Lending Initiative, funded by a grant from New York Community Trust, is a pioneering effort to help borrowers refinance subprime loans by brokering fair deals with major banks and credit unions. The goal is “an ongoing marketing campaign to steer people away from unnecessary subprime loans,” says Banker.
The Fair Lending Initiative seeks to educate borrowers through outreach with community and religious groups, as well as print and television ad campaigns. A toll-free hotline, 800-261-7012, will give callers not only fair lending information but referrals to credit counseling, social services and legal help. “The object is to provide people with options that work,” Banker says. A broad range of community and social service groups are participating, including the Mosholu Preservation Corp., the West Bronx Housing and Resource Center, University Neighborhood Housing, the Urban Justice Center and SEEDCO.
Bronx-based BethEx Federal Credit Union is also on board, getting the word out through its 10,000 members. BethEx will counsel people whose credit ratings have been damaged by bad loans, and it will be able to broker fair loans itself.
Parodneck will serve as a loan broker, too, passing qualified customers on to one of six participating banks: Chase, Bank of New York, Greenpoint Savings, Citibank, Washington Mutual and HSBC. Major financial institutions historically have underserved Bronx borrowers, and the project stands to quickly build the big banks’ presence in the borough.
Banker said he hopes the Bronx initiative will be a model to combat subprime lenders in other communities: “Ideally, we want to do this many times, all over the city.”
--John Tozzi
