Jessie Woodbridge, 73, of Evansville, Ind., was having a tough time making ends meet on her monthly income of $1,183. When she received an ad in the mail from a mortgage broker in Indianapolis, she couldn't resist calling to see what sort of help she could get.
It's a call she wishes she had never made.
Woodbridge paid $33,500 in 1979 for her three-bedroom, white bungalow with black shutters. She refinanced it in 1996, taking out a 30-year, fixed-rate loan with monthly payments of $450. With a monthly car payment of $249 and credit-card debt topping $1,300, she felt in a bind.
The broker's offer was tempting, but Woodbridge hesitated. She tried, unsuccessfully, to talk down the interest rate of 10.9 percent, which was about 3 points higher than the rates for prime loans at the time.
"I never had a good feeling about the loan, but I caved in to the constant calls and pressure to take the loan," she said.
On the one hand, she achieved her goal of lowering her monthly payments. The new mortgage consolidated her home loan of $46,700, her auto loan of almost $12,600 and her credit-card debt. It even included an extra $5,000 to take care of some other bills. Her total payment fell about $75 from what she had been paying just on the house and car.
On the other hand, Woodbridge has little hope of ever paying off the loan. The contract calls for a balloon payment of $58,000 in 15 years. She once again is thinking of declaring bankruptcy, although she fears the loss of her car.
"There are some deals that should not be done," said the Rev. Gerald Arnold, director of the Evansville Minority Community Development Fund.
The appraisal that was used to obtain the loan certainly was suspicious, said Steve Parker, an appraiser himself and co-chair of the committee in Evansville that has been fighting predatory lending. He said the home was appraised at $70,000, about $15,000 to $20,000 more than it's actually worth. The appraiser compared the house to others outside of the South Side neighborhood where Woodbridge lives, Parker found out.
Kathy Muller of the housing agency HOPE Inc. said Woodbridge was a typical target for these sorts of loans: elderly, single, African-American, desperate to consolidate debt and living in the inner city. Also typical were the high fees associated with the loan--she paid $3,500 to the broker alone.
Realizing that the new loan might not have been such a good deal, Woodbridge went to Muller for help. The director of HOPE was able to persuade the lender to give Woodbridge $1,000 back.
Woodbridge isn't sure what to do next. Sadly, she says she will probably be dead by the time the balloon comes due.
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