The $37 million dollar settlement was very big news. The words “predatory lending” have an ominous ring. One imagines people defrauded out of their homes, homes that they have worked their entire life to build. Since land ownership is the basis for inherited wealth, the idea of loosing property is especially odious. However, how many of us are sure we know what predatory lending really is?

The words “unfair agreement” and “fine print” spring to mind. While that is part of the issue, it might be a little harder to nail down. Just skimming this Wikipedia entry on predatory lending sent my head reeling. This article from the New York Times breaks down some individual cases, and is a little easier to follow, but keep your calculators handy.

The form of predatory lending takes many different faces. I’m not going to claim that all the example that I’m going to describe are “predators”, but some facts should cause you to raise an eyebrow.

Background: My neighborhood is mostly Caribbean. While many of the people come from Jamaica, many of my neighbors are from Cuba, Haiti, Puerto Rico, the Dominican Republic, etc… Our collective income levels would be described as lower-middle class. There is enough to own a home, send a child or two to college, and buy a car, but not quite enough to hold a standing reservation for a charter flight. Most everyone has children that were born in this country while they were not.

1. Phone calls
I receive at least four calls a month asking me to refinance my home or take out a loan against my home. This is funny since I have no outstanding debt.

2. Paper
A few times a month, a card or brochure will find its way into my screen door from some sort of real estate agency asking if I want to sell, refinance, borrow against my home, or something to that effect.

3. The Bank
Here’s where it gets a little unnerving. There are about four bank within walking distance of my house. At least once a month, there is a “specialist” standing in the vestibule with information on refinancing, borrowing against my home, or taking out a second mortgage. Pamphlets are brochures are at the ready, along with a friendly smile. Most of the time, I use a bank branch in a different neighborhood, a very affluent neighborhood. Signs about second mortgages, and the aforementioned representatives are curiously absent.

I don’t believe that the issue of predatory lending is a black/white issue, though it may play out along racial lines. The same scenarios may play out in working/middle class white neighborhoods. Nevertheless, the trend is disturbing. The person that leaves a message on my answering machine is assuredly from an island, and the man with the easy handshake at the bank has a tan.

My next door neighbors have been in the neighborhood a little over two years. The old family was Puerto Rican. They moved from this urban area to “the suburbs”. The family had a daughter, son-in-law, and a new grandchild. At the behest of their children, they sold their home. Occasionally, I still see them in the neighborhood, as they come back to shop in the supermarket that caters to Caribbean tastes. The sad part is that they are miserable. They are uncomfortable in the new neighborhood, mortgaged up to the hilt, and the money that they are paying for a neighborhood where they could send their child to a good public school, they could have paid for private schooling five time over. So why did they sell their home?

A home represents a significant investment, as I stated before, it is the basis for inherited wealth. A mark of opulence, or achievement, is home ownership. However, as the adage goes, the most important part of home ownership is location, location, and location. The perception is that if you own a home in a certain neighborhood, you are just getting by, and it may be a rest-stop on the way to a better life. One may own a home, but if you don’t own it in a certain area, you haven’t really made a “real” investment. The notion of “building a neighborhood” seems to be gone. One has to buy into a neighborhood, and that enclave has to be the “right” enclave, or one will be subject to curious looks and the unwanted advances of sharks in tailored suits.