Since
1986, we have helped 45,000 families successfully
negotiate the homebuying process and achieve the American dream of homeownership
for the first time
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Since
1986, we have helped 45,000 families successfully
negotiate the homebuying process and achieve the American dream of homeownership
for the first time
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June 11, 2002 The Swanson’s son Max is autistic. It bothered the Swansons that neighbors would complain about their son’s voice, and they felt that they really needed a home of their own. The trouble was, Darryl only made $11 an hour as a health care worker for the disabled, and Amy takes care of Max full-time, so they didn’t have enough for a down payment, let alone a mortgage. But next to the Swansons’ apartment building, there was a small one-bedroom house that was owned by the local church. When the renter who was living there skipped town, the Swansons asked the minister about the monthly rent payments. The minister offered to sell it to them for $18,000, with very reasonable terms, and they were pleased to accept his offer. "It was a garbage house when we moved in," Darryl said. But the couple fixed it up with help from a grant program through the City of St. Paul that paid for a furnace, water heater and insulation. As they worked on making their home clean and comfortable, they made each payment on the small loan until they owned their place free and clear. As the couple had no credit cards or other debt, and had always been very conservative financially, they were able to pay it off without a hitch. The real trouble started when their old Aerostar van broke down. The couple reasoned that they had equity in their home, and decided to get a loan to buy another used van and some household appliances. "We had never borrowed much," Darryl said, "but when we went to lenders like Wells Fargo and Twin Cities Federal, and they turned us down, we were surprised." Their home was paid off and they had no real debt. "It’s not like we were going to Hawaii or buying a boat. We wanted a stove and a fridge and a used car. We’re not trying for fancy or luxurious. We just want normal." But they decided to forget the appliances, and just get the car, so they went to the car lots and they were mysteriously turned down again. It turns out that due to the grant program through the City of St. Paul, the City had first lien rights to their home and the lenders were therefore uneasy about accepting the Swansons’ application. But the lenders who rejected them never supplied this explanation to the Swansons. What one of the car salesmen did however, was give them a phone number and told them to call his friend who would be able to get them the funds. That’s how they ended up with Beneficial. The woman on the phone said, "let me ask one question, do you own your home? . . .Well, then we can do business." She said it would be "Green lights all the way." The Swansons thought this seemed a little suspicious since everyone else had turned them down, but they had heard of Beneficial and Household and seen their TV commercials. "It’s wasn’t like they were Shady Tree Loan Company or something," Darryl reasoned, "They were a national company, like a bank." Everything was done over the phone until the closing. Then, at 5 pm on a Friday, the Swansons attended the closing. The Beneficial representative who had gathered their information insisted that Darryl need not take time off work and that 5:00 closings were common practice. Still, the couple felt uneasy when they arrived and everyone at Beneficial was putting their coats on, turning lights off, and heading out for the weekend. According to Darryl, "Everyone was so cheery and friendly, and the same time they rush you. That’s their style. I’ve talked with 5 different Beneficial borrowers since then and all of them had the same experience." The Beneficial representative brought her 8 year old daughter to the closing, who wore her coat the entire time as her mom joked about how she didn’t want to be late for the basketball game they were attending that night, as the Swansons tried to understand the pile of documents. When asked about specific terms, she kept repeating that in seven years they would have their loan paid off completely. She was laughing and joking about the basketball game and the van that the Swansons would be able to get, but she didn’t explain anything and brushed off their questions. "She was talking about everything but the loan," Darryl said, "We were kind of in a fog afterwards." With their loan proceeds, they purchased a washer and a used van. When they received an unexpected "magic check" in the mail 9 months later, they used it to buy a dryer. When the Swansons asked why they were able to get loans from Beneficial, but had been turned down everywhere else, the representative said, "I have no idea why these people didn’t lend you the money. With us, you have A-1 credit." But borrowers with A-1 credit do not generally pay 22 % interest rates like the Swansons paid on one of their Beneficial loans, or even 15% like they paid on the other one. The Swansons were becoming more and more concerned about the fact that each month, the loan amount wasn’t decreasing. It seemed like they were paying only interest and they were beginning to question whether it would actually be paid off in seven years like the Beneficial representative had promised. When they received a flyer from ACORN Housing that described some of Household and Beneficial’s predatory practices in their neighborhood, their suspicions increased. The Swansons brought their loan paperwork into an AHC office and were devastated to discover some of the damaging terms of their loan. They learned that they would have to pay Household a prepayment penalty of $2000 to get a better interest rate with another lender. They were unaware of this until an ACORN Housing representative reviewed their documents. They also discovered some hidden and unnecessary insurance products that they were paying high interest on had been included. The Swansons had no idea that Beneficial has stuffed almost $1000 of practically worthless credit life, disability, and unemployment insurance products into their $5000 loan until someone from ACORN Housing reviewed their documents. AHC was able to help the Swansons through our program with Ameriquest. The two Household loans, at 15.7% and 22%, had a total monthly payment of $486. AHC was able to arrange a new loan with Ameriquest with much better terms. The interest rate on their new loan is 7.74% and the monthly payment is $154 -- saving them over $330 a month. When asked about AHC counseling, Darryl said "Without Jordan, AHC Regional Supervisor, there’s no way we would have gotten out of it. We didn’t even know what was happening. We looked at the statements each month and said the loan doesn’t seem to be going down. We just pay interest. But she had promised us it would be done in 7 years. They probably just told us whatever we wanted to hear. Thank God we got out of it." But the Swansons haven’t heard the last of Beneficial. "They never quit," Darryl said. "They still send magic checks. In our neighborhood—low income, working people—something’s always breaking down. People need to fix their car, their roof, their furnace. You get that check in hand and then pay the price after. People get so sucked in."
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The two Household loans, at 15.7% and 22%, had a total monthly payment of $486 AHC
was able to arrange a new loan with Ameriquest with much better terms.
The interest rate on their new loan is 7.74%
and the monthly payment is $154
|
Beneficial
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