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Federal Document Clearing House
Congressional Testimony
January 8, 2002 Tuesday
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 721 words
COMMITTEE:
SENATE BANKING HOUSING AND URBAN AFFAIRS
HEADLINE: PREDATORY LENDING PRACTICES
TESTIMONY-BY: MS. RITA HERROD, A PRIVATE CITIZEN FROM
AFFILIATION: WEST VIRGINIA
BODY: Hearing on "Predatory Mortgage Lending
Practices: Abusive Uses of Yield Spread Premiums."
Prepared Statement of
Ms. Rita Herrod A Private Citizen from West Virginia
Tuesday,
January 8, 2002
I am glad to have the chance to come here today and tell
what happened to me so that others are not treated the way I have been treated.
My name is Rita Herrod, and I am a sixty-two-year-old mother, grandmother, and
now, great-grandmother. I am currently disabled and unable to work. I live with
my daughter and grandchildren, and I own my home with my daughter. In July of
1994, I bought a house in Clarksburg, West Virginia, for $22,000.00 for my
daughter, Jennifer and her children. About four years later when I divorced my
husband of thirty-four years, I moved into the house with my daughter and
grandchildren, and I live there today.
In 1999 my daughter and I took
out a loan to make improvements on the house. We got a decent loan from a local
bank for 15 years with a variable rate beginning at 7.8%. I would end up not
getting much of the benefit of this loan.
In early 2000 my troubles
started when we encountered a mortgage broker we thought we could trust, Earl
Young. My daughter Jennifer was working for Heilig Myers, where she met Mr.
Young. Mr. Young, who worked for First Security, distributed his card to my
daughter for her to distribute to others. Because my daughter knew Mr. Young and
we had some bills to pay, we responded to his solicitation in April, 2000.
Mr. Young told us he would get us a home loan with a lower interest rate
on our current loan. He told us he was going to search and find for us the best
deal he could.
Mr. Young arranged for an appraisal of our house. He said
not to worry that I was not working and not to worry about the rumors that my
daughter would be laid off in the near future. The appraisal he got for my
house, I found out later was for far more than it was worth.
We closed
the loan the next month. We had to meet at Mr. Young's office. He seemed to have
taken care of everything. He told us he was giving us a good deal. He said that
our appraisal did not come back at what they wanted, so he had agreed to cut his
own fees to work the deal.
I wonder now what part of his fees Mr. Young
cut. He charged us an origination fee of $4000, a broker fee of $2600, and I
learned from my lawyer that he got a kickback from the mortgage company of $3304
for getting me into a higher interest rate.
My loan was for just under
$85,000, and I ended up paying over $10,000 in fees to Mr. Young. Now I say that
Mr. Young appeared to take care of everything, but I don't think he did $10,000
worth of work on my loan. He took our information and arranged for an appraisal.
I don't know what all else he did, but I know the mortgage company faxed him all
the papers. I had no idea I was going to have to pay him so much, and I can't
for the life of me figure out what I got in return. And while I guess Mr. Young
charged me $4000 commission for finding the loan, and $2600 for his fees, I have
no idea what he did to earn the extra $3304. Had I known $10,000 was going to be
tacked on to the loan, I would never have done it. Had the broker not taken a
kickback, I would have at least had a rate of 8.85%, maybe lower. Instead, I got
a loan up near 10%.
I now have a loan that far exceeds the value of my
house, making it so I cannot take advantage of lower interest rates and
refinance. I am stuck with this loan, which requires that I make over $275,000
in payments at an APR of almost 10%. At the very worst, I could have stayed with
my old loan, avoided the extra fees, and dealt some other way with my bills
instead of putting them into my home.
I don't have any problem with
people helping folks find a loan to help them out of a bind, or get them a good
deal. But I don't think it is right for a broker to take a secret kickback of
over $3300, when they already are getting almost $7000 in other fees. And I
don't think it was worth $10,000 to get a loan that is worse than what I had,
when there are much better deals out there. We trusted Mr. Young, because we
thought it was his job to find us the best deal. But instead, he cheated us out
of a lower interest rate and $10,000.
LOAD-DATE: January 9, 2002