The Home Equity Killer

Protect Yourself Against Predatory Lending..."The Equity Killer".

Predatory Lending is an equity killer that robs consumers of over 9 billion dollars each year in equity from their homes.  Consumers can lose equity in their homes by being placed in higher interest rates than they qualify for, by paying junk fees that are financed in the loan, or by being placed in exotic mortgages that cause equity stripping.  Predatory Lending, simply stated, is the practice of unfair lending. Predatory Lending victimizes hundreds of thousands of families every year. For the past 4 years, Fair Community Lending Services,   www.fcls123.com has worked to protect consumers against predatory lending through education, access and accountability.

So what is Equity?

Equity is your ownership in the property you own, also known as your asset position.  A mortgage is your liability.

Example 1: Value of Home: $300,000

Liability/Amount owed to Bank: $200,000

Equity = Value of Home – Amount owed/Liability: $100,000

How do you gain equity and how does Predatory Lending affect that equity?

Equity is gained in two different ways. You gain equity by paying down your loan and through market appreciation.  Appreciation happens when the price or value of your home goes up.   Paying down your loan happens when you pay on the principle each month.  Please see an example of appreciation.

Example Appreciation

You purchase your home in January 2006 for $400,000.

After 5 years the value of your home goes up to $600,000.

You owe the bank $300,000.

Equity remaining in your home is $300,000.

Equity is also gained through paying principle on the loan. Therefore, if you take out a mortgage that requires you to pay the fully amortized payment, you will pay principle and interest. The principle portion of the payment pays down the loan, and the interest is the cost of the loan.

As shown in Example 3, the higher your rate the more interest you pay, and the longer it takes you to pay down the loan on your home.  This means you pay much more towards interest as opposed to building equity, which is your wealth.

How You Tap Into Equity?

If you decide to sell your home you will have to pay off the amount owed to the bank and any remaining money that  would come to you after you pay the fees to sell your home.

You can also gain access to your equity by refinancing your home. Refinancing your home means you work with a bank or broker to take out a new loan on your home. The existing lender would have to be paid off through the refinance, and you will receive a new rate and a new program. You will also pay loan fees to the bank or broker to establish the new loan.

So How Is Equity Lost Through Predatory Lending?

Example 3

Equity Stripping By Paying A Higher Interest Rate!

Over 50% of American families are paying a higher interest rate on their mortgage than they qualify for.  Minority families pay an average of 2-3% more on their mortgage than white consumers with the same credit score.   Here is what a 2% difference in rate can cost a consumer.  

Interest Rate: 7%

Loan Amount: $300,000

Total Payment: $1,995.91

Total principle paid after 1-year: $3,047.47

Total interest paid after 1- year: $20,903.45

Interest Rate: 9%

Loan Amount- $300,000

Total Payment: $2,413.87   (principle = equity that will be available to you.)

Total principle paid after 1 year: $2,049.61

Total Interest paid after 1 year: $26,916.83

$6,000 per year in extra interest X 30 years = approximately $180,000.

That is only the beginning.  If you pay one extra payment a  year on a 30 year mortgage, you will cut it down to 22 years. This means you will save 8 years of interest.

If the loss of equity, of $6,000 dollars was utilized to accelerate the growth of equity a homeowner can put over $300,000 back in their pocket.   

$6,0000 in lost equity per year could be used as such;

$2,000 to make an extra mortgage payment.

Saving 8 years of payments -   $1,995.91 X 12 X 8 =  is $ 191,000

Total SAVINGS:

$180,00 + $191,000 = $371,000

$4,000 is left for client to put into 401k or savings,.

The economy is going through tough times and so is the American Family. The savings level is at an all time low and the gap between the Rich and the poor is the largest it has been in 75 Years. 

We need politicians to focus on the money that consumers are losing now today and the foreclosures that are at an all time high instead of talking about possible ways to invest social security to help make the golden years a little better.    The billions in equity that is lost is health insurance coverage, college education, future security and for many foods off their tables. 

Let's start with the basics and protect the corner stone of the financial security of the American family, their home.

Let's help Americans Take Back their wealth and secure their future.  

Predatory Lending Facts

9 billion dollars is lost each year to Predatory Lending and minority families.  The seniors community and the single mothers are the #1 victims.

In 2005, national banks charged minority families an average of 2-3% more on their home loans than white consumers. On a $ 300,000 loan 2-3% higher means a payment of $500-$700 more each month. Over 50% of families are paying a higher interest rate on their  mortgage than they qualify for. 

Affluent African Americans have 4 times the chance of being victims of Predatory Lending than low-income white families.

In 1920, the African American Community owned 15.5 million acres of land. Today they only own 1.1 million acres of land.

Women hold the majority of Sub prime Mortgages (Mortgages that carry a higher interest rate).

The Hispanic community has twice the chance of being victims of Predatory Lending than low-income white families.

HOW TO PROTECT YOURSELF http://www.fcls123.com/predatory_lending.html

Join us today www.myspace.com/stoptheequitykiller and help us spread the word or log on to www.fcls123.com to learn more. FCLS 24 Hours – 1- 888-908-3667

Check Your Interest Rate 24/7 www.feepolice.com.

Writer

Shirin is the founder of Fair Community Lending Services Inc.   Fair Community Lending Services Inc., has been in business for over 4 years educating families on predatory lending, providing them access to affordable financing options and putting strict quality measures in place to ensure they are protected.    She is also a national speaker on wealth building, credit and predatory lending and has been featured on radio stations such as KIIS FM LA, KRQ LA, THE BEAT LA, HOT 92JAMZ LA, JACK FM LA, URBAN RADIO NETWORKS NATIONAL, XM RADIO.   Noted as a Fair Housing Advocate in L' Opinion Newspaper, her upcoming book, “Stop The Equity Killer”, will address the extreme loss of equity that is causing millions of families to lose billions in equity and many of their homes. It is her hope that through education, access and accountability, families can be protected in one of the biggest investments they will ever make, their home.  For Booking information shirin@fcls123.com.