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The Hard Sell: Part III – Recommendations

The Hard Sell: Part III – Recommendations

The Hard Sell: Combating Home Equity Lending Fraud in California

 Executive Summary
Part I of this Report
Part II of this report
Part III of this report



Home equity lending fraud and abuse is still a problem even though there have been significant advances in law enforcement, education, and legislation. The Hard Sell repeats many of the recommendations we originally made in 1995. These recommendations are still relevant and must be addressed in order to have even more impact on reducing the tragedy of home equity lending fraud and abuse. We also include some new recommendations to further the advancements that have been made since 1995.


  • Recommendation: Prohibit balloon payments on home equity loans unless the borrower has the option to fully amortize the payment at the end of the initial loan term. Loans based on balloon payments – a large, final payment at the termination of the loan – came into common use in the late 1970s and early 1980s, when high interest rates made home buying unaffordable for many Americans. The purpose was to give homeowners an opportunity for lower payments through what became known as "creative financing."

    Although balloon payment loans may have provided an entry into the home ownership market, the payment structure of monthly payments (going toward interest only with an unusually large payment due at the end) has caused many problems for California homeowners. In the early 1980s, many Californians with balloon payments were forced to sell their homes for little or no gain as the balloon payment came due.

    Balloon payment loans are often misleading and unnecessary, and should be prohibited. Although current federal law undermines a state’s ability to limit balloon payment loans (90), (regardless of whether a loan is a first- or second-lien), compelling reasons exist to re-examine the usefulness of such a prohibition.

    Today, unscrupulous lenders use balloon payments to convince naïve borrowers they will receive funds for a lower monthly payment, knowing the borrower will eventually not be able to make the balloon payment. When that payment comes due, these lenders foreclose on the house or arrange for a new loan with even higher rates and fees.

    Moreover, the protections for consumers against balloon-payment loans contained in the Home Ownership & Equity Protections Act of 1994 (HOEPA) are incomplete and subject to weakening in Congress.

  • Recommendation: Prevent weakening consumers’ right of rescission for refinance loans and equity loans under the Truth in Lending Act. Although the Truth in Lending Act is federal legislation, maintaining the right of rescission is of great importance to home equity loan victims in California and nationwide. Unscrupulous lenders often violate the Truth in Lending Act, and legal advocates in California see the Truth in Lending Act and its right of rescission as effective weapons to help victims recover damages or hold onto their homes. If Congress and the President intend to help consumers, and not abusive lenders, they should reject any future efforts to weaken the right of rescission.

  • Recommendation: Reinstate reasonable usury laws and floating rate caps on all second mortgages and revise the Federal laws prohibiting the states from regulating interest rates on first liens. Until the sharp rise in interest rates in the late 1970s, interest rate caps had been an integral element of consumer protection. Even as far back as 1827, the Virginia Supreme Court observed:

    • "It has been a good deal the fashion of late, to decry the policy and justice of our laws regulating the rate of interest. It may be permitted to observe, however, that if the experience of the ages, and the general opinion of mankind, deserve weight in legislation, their voice is in favor of usury laws. They have prevailed in all civilized countries, and in all time."

      Whithworth & Yancy v. Adams, (1827) 26 VA. 333.


Usury laws — which are considered by many consumer organizations, law enforcement agencies and legal advocates to be the most effective method of controlling lending fraud and abuse — can be successfully integrated into today’s volatile marketplace. Currently, federal law prohibits states from regulating "the rate or amount of interest, discount points, finance charges, or other charges" on loans secured by a first lien on residential real estate (91). However, states are free to reinstate usury laws on second mortgages. And because first liens are often part of the problem in abusive home equity lending (92), California’s Congressional representatives should reintroduce legislation to remove the restrictions on states to regulate interest rates on first liens as well.

Reasonable rate caps on home equity loans can be set by using floating caps based upon the current rate for a widely accepted financial index (such as Treasury bills or the 11th District cost of funds). This would still allow room for competition and enough of a margin to allow lenders to make riskier loans. A margin such as 10 points (consistent with the federal definition of a "high-rate" mortgage) could then be added to establish a cap that would include all broker and loan fees.

As mentioned earlier, usury laws may be antithetical to the prevailing trend toward deregulation. However they are an effective way to prevent crime, which is high on the public’s political agenda. Some interest rates are so high that they violate the public interest. A reasonable usury law can protect against exorbitant rates that are not offered for the convenience of parties with questionable credit, but are solely an attempt to prey on the desperation or distress of a vulnerable borrower.

  • Recommendation: Place additional state restrictions and requirements on "high-rate, high-fee" loans as defined by the federal Home Ownership and Equity Protection Act. The federal Home Ownership and Equity Protection Act of 1994 modifies the federal Truth in Lending Act to define and restrict "high-rate, high-fee" loans. California should go a step further.

    Using the definitions in the Act (points exceeding the greater of $435 (93) or eight percent of the loan, or an interest rate greater than ten points over comparable Treasury Bill rates), high-rate, high-fee mortgage loans should be subject to the following conditions in California:

    • Borrowers must be provided with a mandatory waiting period of seven days in which to read the loan documents and seek advice before signing.
    • Borrowers are required to provide their initials next to the interest rate and fees, to acknowledge they have seen the extraordinary terms of the loan.
    • High-rate, high-fee mortgages may not be consummated if payments on all existing debt exceed 40 percent of the borrower’s total income, and should be void if miscalculations or misstatements are made by the loan officer so the contract can appear to meet this condition.
    • Loan documents should include a statement, in bold-face type, which clearly states that the borrower is entering into a contract with terms that exceed general market rates. The statement should be more direct and clear than what is required by federal law and written in the language in which the loan negotiations were conducted. For example, such a notice could say:


Important Notice of High Fees and Interest Rate

The fees or interest rate this lender wants to charge you are
much higher than normal. They are so high that they greatly increase the risk
that you will end up losing your home.

They also greatly increase the risk that you will end up
losing the equity in your home.
Before you sign this contract, you should look for a cheaper
source of credit. You should also talk to (appropriate agency). 

  • In addition to requiring written disclosure, lenders are required to provide borrowers with oral disclosure of the contents of the "Important Notice" paragraph cited above.
  • Recommendation: Prohibit all door-to-door soliciting of loan services and home improvement services that are financed through a home equity loan. A common denominator in many home equity scams, especially those involving home improvement, is that the initial contact is made through a door-to-door solicitation. Prohibiting door-to-door soliciting of home equity loans and any home improvement services that are financed by loans against the property should have a substantial impact against scam artists. Even though they may still be able to target neighborhoods and potential victims by mail, the impact of a letter is far less powerful than having a friendly stranger offer money at the front door.

  • Recommendation: Place additional restrictions on home improvement contractors acting as mortgage brokers or de facto agents of mortgage companies. One of the greatest single sources of home equity loan abuse has been home improvement projects in which the contractor arranges for a loan to pay for the work. Unfortunately, the work isn’t always completed or fails to meet local building code standards.

    By arranging for financing and acting as the link between the customer and a lender, a contractor is actually acting in the same capacity as a mortgage broker. Unethical contractors often work with unethical lenders. The result can be tremendous loan fees and "sweetheart" high-commission loans.

    Although SB 214 (Rosenthal) now prohibits home improvement contractors from acting as agents for lenders by negotiating for or arranging financing for a home improvement contractor, California should go a step further and follow the lead of the state of Massachusetts by requiring the following:

    • Lenders must personally inspect and sign off on completed home improvements before full payment is tendered.
    • Payments on home improvement loans may not exceed 40 percent of the borrower’s gross income.
    • Lenders who finance home improvement projects should be subject to consumer claims and defenses so homeowners cannot be left with a half-finished remodeling job and a loan for the project that is still due. Consumers’ rights should be preserved even if the lender breaks the law by omitting from the contract the clause required by the Federal Trade Commission to preserve consumer claims and defenses against buyers of the note.
    • Checks for the entire loan amount, less loan fees, must be presented to the borrower, not the contractor. If both parties agree, the loan proceeds instead may be held by an independent, licensed escrow company for proper disbursement when the work is completed.
  • Recommendation: Require pre-loan counseling for all homeowners applying for loans that will result in debt payments exceeding 40 percent of income. Conversations with dozens of victims of home loan scams reveal that many of them did not understand the impact of interest rates and points on the cost of a loan. Many also did not understand the relationship between their monthly income and new monthly payments since they were told they could qualify for loans simply because they had equity in their homes.

    Clearly, many abusive loans could have been averted if the borrowers had received pre-loan counseling from an independent consumer agency. Victims could have been made aware of lower-cost financing programs. Counseling can help the borrower determine how much money he needs to borrow — rather than simply taking what the lender offers — and help to ensure that the loan documents are completed fully and accurately.

    Mandatory counseling for borrowers whose total monthly debt payments (including non-mortgage payments) exceeds 40 percent of monthly income would create a disincentive for scammers to prey on the elderly and naive, and would allow counselors to alert law enforcement officials about lenders exhibiting illegal or abusive practices. Counselors could include HUD-approved counseling agencies, nonprofit community counseling services, and community housing or consumer affairs organizations.

    While counseling would be mandatory, the borrower would still be free to choose to enter into a loan transaction against the counselor’s advice. Some borrowers may make this choice, but conversations with home equity loan scam victims indicate that they would have looked for other alternatives if they had been given adequate information about the risks and the nature of unfavorable loan terms.

    Educated borrowers are safer, smarter borrowers, and smarter borrowers are better credit risks. Pre-loan counseling has been recognized as beneficial to both borrowers and creditors by consumer advocates and mortgage banking industry leaders.

  • Recommendation: Require counseling for borrowers seeking to refinance an existing loan which has gone into default. Homeowners on the verge of losing their homes are desperate for relief. They are among the most vulnerable of potential victims. Unfortunately, in many cases, it is often better to sell the home at the outset of the foreclosure process than to try rescue measures that may lead to a total loss of equity.

    Homeowners who have had notices of default filed against them often are bombarded with rescue offers from lenders, mortgage brokers, attorneys and others. These often lead to desperate, expensive and ultimately worthless activities — such as entering into high-rate loans that the homeowner has no chance of repaying. These pitfalls could be avoided through post-default financial and homeowner counseling by independent, nonprofit agencies.

    To make assistance accessible, realtors and title insurers should help fund free or low-cost counseling and education programs administered by nonprofit homeownership or credit counseling groups or governmental agencies. Mainstream banks and lending agencies also should be encouraged to set up cooperative ventures with these entities to provide financial and pre-loan counseling to existing homeowners in inner-city and low-income neighborhoods. Some major banks now provide homeownership preparation programs for low- and moderate-income people who hope to be future homebuyers. Existing homeowners need similar consumer education directed to home improvement loans and second mortgages.

  • Recommendation: Maintain and increase the vital funding law enforcement agencies need to fight home equity fraud and prosecute criminals. Supplement these funds through assessments on licenses or voluntary contributions from industry. SB 537 (Hughes), which passed in the California legislature in 1995, can provide vital funding to district attorneys and local law enforcement agencies for the purpose of determining, investigating, and prosecuting real estate fraud crimes. The funding would come from imposing a nominal fee for recording real estate-related documents.

    Title companies, which have a financial interest in preventing home equity fraud, provided $500,000 to Los Angeles law enforcement officials in 1994 to fight fraud. Since the enactment of SB 537, the title industry has provided substantial assistance to local District Attorney real estate fraud units, such as advice on title-related matters and help in locating expert witnesses. Other industries with a financial or public relations stake in preventing home equity loan abuse — such as reputable realtors, lenders and mortgage brokers — should help underwrite some of the costs of enforcement programs. Additional money or matching funds could be made available through a small assessment charged on real estate and lending license applications and renewals.

    Although we recommend many legislative changes, there are also steps the regulators can take today to protect homeowners from lenders engaging in abusive and illegal practices.

  • Recommendation: Regulators should take vigorous regulatory action to investigate and prosecute cases of home equity lending abuses and fraud. Regulatory agencies must identify and treat home equity abuse cases as high priority. This means these cases must be assigned for immediate, timely, and thorough investigation with appropriate follow-through. Regulatory agencies must vigorously prosecute the offenders, including avoiding settlements which are against the public interest. They must be true advocates for the public interest at administrative hearings involving the offenders.

    Regulatory agencies must ensure that offenders comply with the terms of any settlement reached or disciplinary action imposed. It should be the responsibility of the regulatory agency prosecuting the offender to ensure that the offender does not re-enter the profession by opening up business under another name or under someone else’s license.

  • Recommendation: Make home improvement contractor and mortgage lender complaint records readily available by region. The public often does not know where to look to determine whether a contractor or lender has an existing record of abusive practices. The Contractors State License Board, Department of Real Estate, and the Department of Corporations should issue and make available regular reports that could help consumers avoid unscrupulous lenders and contractors by showing the number and nature of complaints against companies.

    Consumers also should have access to information about pending complaints against companies, information that is not currently released. Privacy and due process rights could be protected by revealing the number and general nature of the complaints against a particular entity, with a disclaimer stating that the allegations are not conclusive and are still under investigation.

  • Recommendation: Develop identification programs which inhibit criminals’ ability to set up new lending and brokerage businesses by changing names. Civil and criminal cases involving home equity loan fraud often involve defendants who have been associated with a string of companies whose names have changed or "reformed" after legal action or bankruptcy. It is not unusual for disreputable lenders or even known criminals to set up shop under a new company name after the old company has been the target of a license action or a civil suit.

    Preventing convicted criminals and disreputable lenders from operating under new names or holding a key position at a different company should help reduce the number of repeat offenders. One way to accomplish this goal would be to require all companies to provide a current list of all key officers. Those officers should then be held to the same standards of honest business practices and character that would be required of the corporate licensee.

    If the officers do not meet the licensing agency’s character standards or are known to have a history of abusive lending or disreputable practices, the company’s license application should be denied. Existing licenses should be subject to revocation and their holders liable for criminal and civil penalties. This would give the company owner more incentive to hire quality people and would increase the state’s ability to hold entire companies to higher standards of practice.

  • Recommendation: Regulators and legislators should require lenders with conventional and subprime divisions to automatically refer borrowers who qualify to the lender’s conventional lending division. This would address the temptation for lenders who have both conventional and subprime lending divisions, subsidiaries, or affiliates, to take advantage of an innocent customer who may have first contacted the subprime division but who may qualify for a more favorable loan from the same company’s conventional lending division. It is now the common practice for lenders with both types of lending divisions to refer less qualified customers from their conventional division to their subprime department. There is no assurance, however, that the industry practice is to refer customers in the opposite direction. This would assure customers of a true two-way street in borrowing when dealing with an increasing number of conventional lenders which now have subprime lending divisions, subsidiaries, or affiliates.

  • Recommendation: The California Legislature should reconsider and pass, and the Governor should sign SB 586 and SB 214 (Hughes). In 1997, both of these bills passed both houses and were unopposed. Nonetheless, Governor Pete Wilson vetoed them both. They are examples of excellent bills that would have really made a difference for those individuals who are targeted for home equity lending fraud and abuse. SB 589 would have required a lender to consider the borrower’s ability to repay a mortgage loan. SB 214 would have prohibited the seller of a home improvement contract from taking a security interest, other than a mechanics lien, in the home of a person age 65 years or older to secure payment of the contract.


  • Recommendation: Local District Attorney offices should meet with local legal aid agencies and consumer advocates to determine if there is a need to establish new real estate fraud units. Often legal aid agencies and consumer hotlines are the first to hear complaints about fraudulent and abusive real estate practices, particularly those involving home equity lending. These groups can be invaluable at providing information to help assess the degree to which home equity lending fraud is a problem in a particular area. The Los Angeles-based Real Estate Task Force is an excellent example of how interested groups combat home equity lending fraud and abuse by meeting regularly to share resources.

  • Recommendation: County governments should support the establishment of local real estate fraud prosecution units by passing resolutions to authorize the County Recorder to collect the appropriate fees and by providing the necessary resources to facilitate the collection and appropriation of those funds to a real estate fraud prosecution trust fund. The law permits but does not require that any county may establish a real estate fraud prosecution unit. Therefore, county governments must be vigilant for the existence of home equity lending fraud and abuse and must be proactive to take steps to establish a special unit when the need arises.

  • Recommendation: District Attorney offices with established real estate fraud units should give the highest priority to cases involving innocent victims of home equity fraud. When considering SB 537 (the bill which set up a funding mechanism for establishing local real estate fraud units in district attorneys’ offices) the Assembly Committee on Local Government Analysis offered a suggestion that the bill be amended to de-emphasize "Institutional Fraud" cases, placing the highest priority on cases involving innocent victims of home equity fraud. There are strong public policy considerations to support this recommendation. Generally, the victims of real estate frauds are either investors or borrowers. While the impact of fraud on investors is not insignificant, borrowers who are defrauded lose a basic necessity — their homes. Many are elderly homeowners and they are usually the ones who have the most limited resources for recouping their losses. This is why public policy considerations, and the legislature, advocate for using the limited resources for real estate fraud prosecution to seek justice for those who are less likely to get it elsewhere.

  • Recommendation: Regulatory agencies such as the FDIC, FTC and the US Department of Justice should continue and expand their investigations into the subprime lending industry. Violations of the law must be swiftly prosecuted and these agencies should continue their efforts to inform the public about the dangers of subprime lending. Other agencies that regulate lending that haven’t initiated investigations should follow the lead of the FDIC, FTC and US Department of Justice.

  • Recommendation: The California Department of Real Estate (DRE) should continue cooperating with the Federal Government to ensure that DRE licensees are complying with the provisions of the Home Ownership and Equity Protection Act of 1994 (HOEPA). The DRE should continue to work closely with legal services providers and local and state regulators to oversee the activities of its licensees with respect to home equity lending fraud and abuse. It should continue and expand its efforts to speak out on home equity lending fraud and what the DRE can and should do to protect consumers. The DRE should investigate ways to conduct effective investigations yet streamline the process to allow for a more speedy resolution for consumers. The legislature should apportion funds to make this possible.

  • Recommendation: The California Legislature should reject the Governor’s plan to transfer the regulation of consumer finance lenders, investment broker-dealers, and other financial entities from the Department of Corporations to the Department of Financial Institutions. Consumer finance lenders in California are actively involved in home equity lending.

    Finance companies need an active primary regulator. This regulation occurs at the state level. Unlike in banking, there is no federal entity which keeps close tabs on the business practices of consumer finance lenders. The Department of Financial Institutions (DFI) provides a different type of regulatory presence. It is a secondary regulator for many, although not all, of its regulated entities. Because there is a primary federal regulator for most banks and thrifts, the Department of Financial Institutions simply does not have the history of vigorous regulation and affirmative oversight which the Department of Corporations has developed in response to its obligations in regulating consumer finance companies.


Educating potential victims is essential to prevent fraud and abuse. Victims of home equity loan abuse say they would never have become involved with the contractors, brokers, lenders, and others who took advantage of them if only they had known what they were getting into.

Education efforts should begin where the victims often meet these abusers. Appropriate sites for outreach include churches, women’s clubs, seniors’ groups, service clubs and other community organizations in neighborhoods where elderly homeowners have built significant equity in their homes.

There are actually several audiences that should be reached, including current homeowners, potential victims, politicians, law enforcement, real estate industry professionals, and future homeowners. The following recommendations are offered to help improve education efforts, make consumers more sophisticated and aware, and facilitate law enforcement’s involvement in preventing abuses and prosecuting scammers.

  • Recommendation: Properly fund programs to reach and inform potential victims about how they can prevent home equity loan abuse. California should consider community education about home equity loan abuse and fraud a high-priority crime prevention measure and fund it accordingly. If money from the state general fund is not available, money can be generated by assessments on licensed lenders, slight increases in recording and notary fees, and through severe fines against companies and individuals convicted of fraud. In addition, title insurers, lenders, realtors, and other segments of the lending industry can promote their financial and public relations interests by voluntarily funding education programs run by legal services type organizations and government consumer affairs offices.

  • Recommendation: Continue to fund and expand statewide the Los Angeles County program requiring county recorders to notify homeowners of notices of default. The program in Los Angeles requiring the county recorder to notify homeowners when a change in title takes place, or a notice of default or foreclosure action is being taken against their property, should be continued and expanded throughout California.

    Surprisingly, many homeowners who are victims of home equity fraud or foreclosure "rescue" agents do not know their homes are in peril until the sheriff nails a foreclosure notice to their doors. By that time, it is often too late to prevent expensive legal action or even loss of the homes. Notices from the recorder’s office are an effective way to reach homeowners early in the process, and the cost of mailing a notice is minimal.

  • Recommendation: Local utilities and banks should include in their customer mailings warnings about questionable home improvement contractor practices and equity loan abuse. County recorders should include similar notices in county property tax bills. Including a flyer in utility and cable billings is a relatively inexpensive and thorough method of reaching almost all homeowners (and future homeowners who currently rent) in a geographic area. Homeowners also can be reached effectively by including similar notices with county property tax bills and with their bank statements.

    For greatest efficiency, a master design for the flyer should be developed — possibly by the state Department of Consumer Affairs — and then localized for each county with the help of local legal aid services, law enforcement agencies, and other appropriate organizations.


Unscrupulous lenders feed on the desperation caused by the actual and/or perceived lack of credit offered by mainstream financial organizations in minority and low-income neighborhoods. Many of the victims who could not find financing at competitive market rates because they were considered unacceptable credit risks go to extraordinary ends to keep current on their outrageous payments made through hard-money home equity lenders.

Here are three ways banks and savings and loan associations can reverse this trend and demonstrate a greater commitment to local communities and their citizens:

  • Recommendation: Banks should develop home equity loan products with sound but flexible underwriting standards and more aggressively market them to low-income and minority neighborhoods. One way to take the market away from irresponsible lenders is to make financial services and credit fully accessible in low-income and minority areas. Many financial institutions are already working to make first mortgages more available in these areas, but similar efforts are needed in the neglected home equity loan market. Banks should develop and aggressively market these loan products to these populations. Banks offering improved opportunities for competitive home equity loans in low-income and minority neighborhoods would demonstrate a commitment to the local community that would likely lead to profitable long-term customer relationships.

  • Recommendation: Banks should recognize their responsibility to serve minority and low-income customers, helping the banks reap benefits over the long term. Banking is a basic service as necessary to communities as a post office or utility. Banking drives the availability of funds for new businesses, mortgage lending and home improvement. All of these activities offer employment opportunities and a better quality of life.

    Banks also must recognize that California is becoming a state with a majority of minorities. Within the next decade, minorities will constitute more than half the state’s population. And minority homeownership rates are expected to soar in the early part of the next century. While some banks are doing more ethnic marketing, growing minority communities are still a largely untapped market for home equity loans from mainstream bank lenders. Banks that involve themselves in these communities now can establish customer loyalty that will lead to a larger share of the marketplace in the future.

  • Recommendation: Require any chartered financial institution or its subsidiary purchasing a high-rate, high-fee loan on the secondary market to offer a competitive-rate loan to the borrower. When a major financial institution, such as a bank or savings and loan association, purchases the note for a questionable or outrageously expensive loan on the secondary market, it tacitly condones abusive lending practices and perpetuates unfair treatment of consumers.

    If a mainstream financial institution buys a trust deed meeting the high-rate, high-fee definition and truly believes the borrower will be able to meet the prescribed payments, there is no reason for the institution to doubt the borrower’s ability to meet lower payments. Requiring "mainstream" institutions to offer lower-interest loans — at possibly slightly above market rates to allow for an increased credit risk — will limit backing for disreputable mortgage companies and brokers. This requirement would be a preemptive step that would help limit future problems and offer more options for consumers.

  • Recommendation: Banks should commit to serving neglected low-income areas. Furthermore, banks should aggressively recruit, train and promote loan agents of color and recruit minority representatives to their boards of directors. Banks and other financial institutions should open and maintain branches in low-income areas. The Community Reinvestment Act places a legal responsibility on banks to serve low- and moderate-income consumers in the communities in which they are located. Unfortunately, many banks lack a significant branch presence in low-income areas, so credit and other services appear to be less available to residents. Local governments should work with banks to encourage them to open branches and serve low-income communities to benefit the community.

    Financial institutions earn more credibility and acceptance, and maintain stronger bonds with the community, when they hire local residents. Local loan agents who are familiar with a neighborhood and its residents can provide additional input in loan decisions that can help provide funds to upgrade homes, improve neighborhoods and increase property values.

  • Recommendation: Local Bar Associations should examine the Home Equity Fraud Hotline program developed by the Bar Association of San Francisco for replication in their areas. This program is a model for training attorneys to respond to home equity fraud cases. It creates access to these valuable services for consumers who need loan documents reviewed by a trained lawyer and for those who may require full legal representation.

  • Recommendation: County and City governments with programs for low-cost loans for home improvements must do more outreach to make the public more aware of their existence. Consumers who know about the availability of these programs are more likely to take advantage of them. With this knowledge, consumers make less likely targets for lenders who want to charge consumers high fees and interest rates for home improvement loans. Some outreach ideas for homebound seniors include distributing information through Meals on Wheels and through the local visiting nurses program. Other good distribution conduits include doctors’ offices, neighborhood organizations, and inserts in local neighborhood newspapers.



(90) 12 U.S.C. Sec. 3801 et seq., Alternative Mortgage Transactions Parity Act of 1982 (AMPTA). Each state had the opportunity to exclude itself from the provisions of this Act. California did not exercise this option.

(91) 12 U.S.C. Sec. 501(a)(1) Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) Pub. L. No. 96-221, 94 Stat. 161 (1980).

(92) Home equity loans are often debt consolidation loans. One way a lender can avoid becoming a second lienholder is to consolidate the existing first lien into a new loan. The lender making the new loan then becomes a first lienholder exempt from many laws which regulate second-mortgage abuses.

(93) HOEPA bars credit terms such as balloon payments and requires additional disclosures when total points and fees payable by the consumer exceed $400 or 8 percent of the total loan amount, whichever is larger. The Board of Governors of the Federal Reserve System must adjust this amount each year based on the annual percentage change in the Consumer Price Index in effect on June 1. On February 6, 1998, the Board adjusted this amount to $435 for 1998.

Executive Summary
Part I of this Report
Part II of this report
Part III of this report