SAVE HOME Targets Predatory Lending in Chicago

Facing an unprecedented increase in foreclosures on subprime home mortgage loans, the city of Chicago has embarked on a campaign to alert homeowners to the predatory practices employed by some mortgage lenders. The SAVE HOME campaign is an ongoing community outreach program that targets at-risk populations: Latinos, African Americans, and the elderly. “SAVE HOME is just one part of a three-pronged effort by the city to prevent abusive lending practices,” says Stacie Young, director of research, planning, and development for the Chicago Department of Housing.

Predatory lending made headlines in Chicago when a September 1999 report by the National Training and Information Center showed home foreclosures on subprime mortgages in the city jumped from 131 in 1993 to 4,958 in 1999. In response, Mayor Richard M. Daley proposed an ordinance that prohibits city agencies from doing business with predatory lenders. The measure, which also defines predatory lending practices, received approval from the city council in August 2000.

Striking back. “Clamping down on predatory lenders through regulation and legislation was the first step,” says Young, who adds that the city successfully lobbied in support of new state rules that provide some protection from unscrupulous lenders.

As the city considered what form its education campaign would take, it created an advisory committee. “We brought together a group of stakeholders—groups working on predatory lending, citizens, lenders, regulators—to discuss various possibilities and review existing materials. As we looked over the materials we had, residents didn’t think the message was clear enough, as they weren’t sure what action they should take,” says Young.

Working with a local advertising agency, the city developed a campaign that mimics the ads used by predatory lenders but warns residents not to get into something they cannot afford. The message is clear, says Young: “Don’t sign on the dotted line until you’ve checked with somebody who knows.” The city’s ads served another purpose, notes Young. “We tried to visually make people think about these types of ads and the response they evoke. We wanted to warn them about this kind of advertising.”

The advisory committee decided to focus on potential buyers and those looking to refinance rather than those who had already entered into a predatory loan. “In many cases these loans are perfectly legal, and there’s not a lot we could do,” says Young. “The committee felt we could help many more people by warning them of the dangers of a predatory loan.”

Saving homes. Developed in English and Spanish, the SAVE HOME materials consist of bus posters, neighborhood signs, brochures, and radio ads. The ongoing program was launched May 14, 2001.

More than 10,000 brochures have been distributed through libraries and senior centers and at homebuyer seminars, church and community gatherings, and community policing meetings. The materials encourage potential borrowers to call a referral line, (866) SAVE HOME. The city used its existing 311, nonemergency operators to collect information from callers. This information was then forwarded to trained college students, who contacted the callers to assess the situation and put them in touch with appropriate service providers. When it came to the assessments, Young says her agency considered using a variety of individuals, including pro bono lawyers and housing advocates, but settled on college students because “[w]e wanted folks who didn’t know the issues inside and out and who wouldn’t be tempted to offer advice.”

However, the students do have a basic understanding of the issues. “We held several 1-day training sessions,” Young says. “It’s important that the students know something about predatory lending and understand what the different agencies do.”

The Chicago Department of Housing sponsored two daylong training sessions on predatory lending for representatives from the delegate agencies to which the calls were referred. Later in the campaign, the city offered predatory lending workshops to local residents.

Garnering support. Although it relied on a number of existing governmental and community resources, the SAVE HOME campaign did not incur startup costs. To ensure the campaign’s financial viability, the Chicago Department of Housing approached foundations and businesses for support. SAVE HOME received a combined total of more than $140,000 from Fannie Mae, Freddie Mac, and eight area lenders. The city council then allocated $300,000, “an important sign of our commitment,” says Young. Much of the money went to develop campaign materials and to pay for advertising.

Gathering results. As of March 31, 2002, the SAVE HOME referral line handled just under 1,000 calls. According to Young, 25 percent of the callers were considering a new loan; 18 percent were in foreclosure; 15 percent thought they might have a predatory loan; and 10 percent wanted information on the campaign itself. The remaining callers had concerns about issues such as home repair fraud or wanted information about new home purchases or area lenders. “We were pleasantly surprised that a full quarter called before they got a loan,” says Young. “It used to be that people would call only after they entered into a loan that was predatory.”

Those with predatory loans have benefited from the Home Ownership Preservation initiative launched a week after the SAVE HOME campaign. A project of the city, 20 local lenders, and a nonprofit organization, Neighborhood Housing Services, this program provides counseling and intervention services to homeowners and helps them negotiate with loan servicing agents. It also includes a $1.2 million revolving loan pool to refinance loans held by predatory lenders. Meanwhile, Fannie Mae has established a 5-year, $12 billion investment plan to fight predatory lending for Chicago-area residents.

No comprehensive assessment of SAVE HOME’s effectiveness has been done, according to Young. “What we plan to do over the next couple of months is to contact our delegate agencies and do a random sample to see what happened to the folks they worked with,” she says. Young notes that the initial questionnaire used by college students “was created to give us enough information to evaluate our efforts.”

Evaluating information. Despite using Spanish-language broadcast and print media and creating materials in Spanish, SAVE HOME has not received many calls from Spanish speakers. Marti Wiles, the campaign’s manager, suggests that members of the Latino community may hesitate to discuss sensitive financial problems with government agencies. The city has increased efforts to involve community development corporations with strong links to Latino neighborhoods in the campaign.

City officials had hoped for greater attendance at community workshops on predatory lending. “Much of the problem was in how we marketed it,” says Wiles. Noting that many residents were unfamiliar with the term “predatory lending,” Wiles says it might have been more effective to call it a workshop on how to consolidate debt or how to refinance your home.

Sustaining the momentum. With the startup phase behind them, city officials are now working to ensure SAVE HOME’s continued viability. Because the campaign relies heavily on existing resources such as 311 operators and delegate service providers, officials are optimistic that the program can be incorporated into the city’s daily operations.

As additional programs are developed, SAVE HOME’s ability to put callers in touch with area service providers takes on added importance.

For more information, contact: Stacie Young, Director of Research, Planning, and Development, or Marti Wiles, Manager, SAVE HOME campaign, City of Chicago Department of Housing, 318 South Michigan Avenue, Chicago, IL 60604, (312) 747–9000.