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Monday, July 21, 2008

The Wall Street Journal details how America is America's latest predatory lender:
Brister Hightower, a retired high-school teacher, lost his rural home near Athens, Ga., to foreclosure after he fell behind on a high-interest mortgage taken out from Superior when the FDIC was running it.

Twenty years ago, Mr. Hightower had purchased what he calls a "small, run-down house" with a tin roof adjacent to a trailer park. He worked with a cousin to fix up the interior, and added insulation, vinyl siding and a second bathroom. In December 2001, he refinanced it with a $120,700 mortgage from Superior, using the proceeds to pay off an earlier loan and some other debt. The 20-year mortgage carried a 10.75% fixed interest rate, compared with the roughly 7% rate then available to borrowers with good credit.

Some subprime problems have been blamed on lenders giving out mortgages for more than a house is worth, immediately putting the borrower in a financial hole. The appraisal used by Superior valued Mr. Hightower's home at $142,000. The three "comparable" properties used to justify that appraisal were well-tended houses situated miles away in neighboring counties. Two were close to the center of Athens, where county officials say property values in general were much higher than in Mr. Hightower's area. County records show the fair-market value for tax purposes of Mr. Hightower's home was less than $84,000.

His loan was among those sold to Beal Bank by the FDIC. Mr. Hightower, now 68 years old, says he tried to keep up payments, but couldn't after "it got to the point I could hardly eat." Beal foreclosed, and in 2005 sold the property at auction for $76,000.

Told that the FDIC was running the bank when it gave him the loan, Mr. Hightower says: "I wouldn't expect the government to rip me off...Can I get some money back?" The FDIC didn't respond to questions about Mr. Hightower's loan.


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