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New Century Financial Corp. has become the latest target of the consumer-activist group ACORN. At issue are borrowers who claim they were forced into an adjustable rate loan and the company’s support of federal preemption.
A group of about 20 community members and ACORN staff gathered Tuesday at a Woburn, Mass., office of New Century Mortgage Corp. to protest alleged unfair lending practices by the California-based company. Chris Leonard, a campaign director in Boston for the Association of Community Organization for Reform Now, told MortgageDaily.com ACORN has found borrowers across the nation have had problems with New Century, but he pinpointed a “predatory” refinance package made to a Massachusetts couple who participated in Tuesday’s rally. “We’ll be filing a complaint with regulators and the Massachusetts attorney general,” Leonard said. New Century “violated consumer protections both on providing a loan not in the interest of the borrower and, secondly, doing a loan the borrower could not afford to pay. Third, the deceptive practices are illegal and consumers should not be lied to.” According to Leonard, the couple, who were struggling to pay the two mortgages securing their home after an injury disabled the husband from work, was “very clear” in letting the originator know they didn’t want an adjustable-rate mortgage and wanted to refinance to one fixed-rate loan with lower monthly payments, “which may not have been realistic, but they were told they could … and that it would be no problem.” Instead, the couple was misled into a New Century refinance plan consisting of two loans; a 30-year mortgage with a 11.2 percent fixed rate and a larger 30-year loan with a 6.1 percent adjustable rate that has an interest-only feature for the first six years — both interest rates higher than the two original loans’ 9.75 percent and 5.65 percent, the campaign director said. But New Century disputes ACORN’s account. In an e-mailed statement Wednesday to MortgageDaily.com, New Century said the loan was originated through a third-party mortgage broker who had direct contact with the borrower and that the company disagreed with ACORN’s characterization of the situation. “If the borrower was dissatisfied with the loan, we were not made aware of the matter until today,” the lender said in the statement. “We welcome the opportunity to address the matter directly with the borrower. “New Century works hard to ensure that the loans we originate are in the best interest of our borrowers. We believe that this loan is in compliance with Massachusetts state law and that there was a benefit to the borrower in originating this loan.” Additionally, the couple specified they were not interested in cashing out equity, Leonard said. However, $25,000 was cashed out and another $23,000 were used to cover points and fees. The couple realized the loan included cashout upon receiving the $25,000 check, but “by that time everything was signed” and they decided to use the proceeds to pay bills. With nearly $50,000 of “stripped out” equity, “there is not sufficient equity on the house for [other] banks to be willing to refinance,” Leonard added. “They’re sort of in a ticking time bomb, could lose their home as their principle isn’t going down and they really are stuck between choosing to feed their three children and paying the loan.” In addition to the alleged “deceptive” practices, ACORN said it is targeting New Century because the lender is actively lobbying — spending about $1 million in Washington — to preempt Massachusetts’ and other state anti-predatory lending laws for high-cost loans. “They’re working to pass a weak federal law that has little or no protection and use that to preempt strong consumer protections,” Leonard said. Without Massachusetts’ consumer protection law, “one thing we are almost certain to have seen with the loan is that they would have had prepayment penalties.” New Century spokeswoman, Laura Oberhelman noted that while New Century complies fully with Massachusetts law, “which is actually one of the best, we are advocates for a strong national standard that will apply to all mortgage lenders.” ACORN said it will file the lawsuit with the state attorney general within the next week or two. The consumer advocacy group has campaigned against Wells Fargo for about three years. Over that time, a chief of Wells’ subprime unit resigned from his position, ACORN filed a lawsuit accusing the lender of not informing borrowers they qualified for a better rate, and Wells has changed certain lending policies such as reducing prepayment penalties and eliminating mandatory arbitration. |
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