DON'T BORROW TROUBLE® SILICON VALLEY CAMPAIGN LAUNCHED TO PREVENT PREDATORY LENDING PRACTICES

Reps. Honda and Lofgren Encourage Consumers to Call Help Line

San Jose, CA – At a press conference here today, a coalition of 10 private and public organizations including the City of San José, Freddie Mac (NYSE:FRE), Neighborhood Housing Services Silicon Valley and the California Association of Mortgage Brokers launched a major public education campaign aimed at preventing predatory lending practices in Silicon Valley. The coalition has established a toll free consumer help line that will be staffed by trained professionals who can offer free assistance to individuals seeking information about purchasing a home, refinancing, consolidating debt, taking out a home-equity loan, and mortgage foreclosure prevention. Individuals can also be referred to appropriate legal or financial experts.

The Don't Borrow Trouble® Silicon Valley campaign utilizes brochures, the www.dontborrowtrouble.com and www.sjhousing.org Web sites, radio and television public service announcements and workshops throughout the community to educate consumers who are most vulnerable to predatory lending practices, including the elderly, minorities and low- to moderate-income individuals. By combining advertising and face-to-face consumer education and housing counseling, the campaign helps consumers avoid abusive lending practices, such as exorbitant interest rates, excessive fees and pressuring tactics.

The campaign encourages consumers to call the Don't Borrow Trouble Silicon Valley referral line at (408) 283-1284. It is hoped that individuals will use these resources for advice before they get into financial difficulty when purchasing a home, refinancing, consolidating debt, or taking out a home equity loan. The help line is also a resource for those who find themselves currently in trouble with foreclosure.

"Potential home buyers who face language difficulties, are elderly, or who are socioeconomically challenged face greater obstacles to obtaining fair mortgages, and are much more vulnerable to predatory practices by unscrupulous lenders," said Rep. Mike Honda (D-Calif.), chair of the Congressional Asian Pacific American Caucus. "The Don't Borrow Trouble campaign will help consumers avoid these pitfalls by providing helpful resources and educating them about best practices."

"Education is an essential tool in the fight against predatory lending," said Rep.Zoe Lofgren (D-Calif.). "I welcome the Don't Borrow Trouble campaign to San Jose and hope that it will help combat this terrible practice by teaching our community's most vulnerable citizens ways to protect themselves."

"Predatory lending practices attack the heart of our communities. These practices can strip away home equity and trap unwary borrowers in a dismal cycle that ultimately replaces homeownership with foreclosure," said Craig Nickerson, vice president of Expanding Markets for Freddie Mac. "Don't Borrow Trouble is a proven method to help stop predatory lending and to keep families in their homes, build wealth and strengthen communities. These organizations should be commended for banding together and combining their resources to educate consumers on the perils of predatory lending practices."

Moses Diaz, coordinator of Anti-Predatory Lending Litigation for the Fair Housing Law Project added, "Predatory mortgage lending costs homeowners an estimated $9.1 billion annually. Don't Borrow Trouble Silicon Valley's education and outreach campaign is a good first step. However, stronger consumer protection laws at both the state and local level are still needed to curb abusive lending practices."

"The Council is to be commended for its enlightened approach to outreach and education," said Paul Stewart, executive director of the Santa Clara County Association of REALTORS®. "They understand that an educated consumer is the best defense against predatory lenders."

"The Don't Borrow Trouble campaign is an excellent program that reminds both Silicon Valley lenders and borrowers to proceed with caution," said Ed Moncrief, executive director, Neighborhood Housing Services Silicon Valley. "Loan agents have a responsibility to protect their client against an uncertain future. When loan agents fail in this responsibility, it is the client, not the loan agent that may face the devastating loss of his or her home."

Organizations participating in this campaign are Bay Area Legal Aid, California Association of Mortgage Brokers, City of San José, Fair Housing Law Project, Freddie Mac, Neighborhood Housing Services Silicon Valley, Pro Bono Project Silicon Valley, Project Sentinel, Santa Clara County Association of Realtors and Working Partnerships USA.

Predatory lending practices strip equity away from homeowners, by repeatedly refinancing a loan within a short period of time and charging high points and fees with each refinance; packing a loan with single premium credit insurance products like credit life insurance, and not adequately disclosing the inclusion, cost or any additional fees associated with the insurance; or charging excessive rates and fees to a borrower who qualifies for lower rates and fees.

Pioneered in Boston by Mayor Thomas M. Menino and the Massachusetts Community and Banking Council, Freddie Mac is the principal sponsor of Don't Borrow Trouble's expansion throughout the United States. Freddie Mac has brought the campaign to 40 locations across the country, and has received more than 100,000 inquiries to the Campaign's help line.

Freddie Mac is a stockholder-owned company established by Congress in 1970 to support homeownership and rental housing. Freddie Mac fulfills its mission by purchasing residential mortgages and mortgage-related securities, which it finances primarily by issuing mortgage-related securities and debt instruments in the capital markets. Over the years, Freddie Mac has made home possible for one in six homebuyers and nearly four million renters in America.

Tips For Avoiding Borrowing Pitfalls
Source: Freddie Mac

Say NO to "easy money." Borrowers should beware if someone claims "credit problems won't affect the interest rate." Avoid solicitations for loans that sound too good to be true. If it sounds too good to be true, it probably is. If a solicitation is really interesting, get it in writing!

1. Shop around. Borrowers should talk to several lenders to find the best loan for which they qualify. A loan product or lending practice may not seem predatory until compared with a similar loan product offered by other lenders.

2. Understand the loan terms. Borrowers should compare loan terms from different lenders. Understand the best loan terms available in the marketplace and compare the APR (annual percentage rate) of loans from different lenders. The APR takes into account both the interest rate and the points and fees of the loan. A nonprofit housing counselor or a lawyer can review the information with a borrower

3. Find out about prepayment penalties. Borrowers should know if the loan offered to them has a prepayment penalty. Prepayment penalty should be a choice, not a requirement.

4. Make sure documents are correct. Be cautious of someone who offers to falsify a borrower's income information to qualify for a loan. Borrowers should never falsify information or sign documents that they know to be false.

5. Make sure documents are complete. A borrower should not sign documents that have incorrect dates or blank fields. Be wary of promises that a lender will "fix it later" or "fill it in later."

6. Ask about additional fees. Borrowers should question any items they didn't ask for. Borrowers should also beware if they are told that single premium credit insurance is required get a loan, or that purchasing it will help loan approval. Review every fee and compare different lenders' fees to ensure the most competitive loan terms.

7. Understand the total package. Ask for written estimates that include all points and fees. The situation may not seem abusive until everyone gets to the closing table. If any fees or charges differ from what was previously disclosed, delay the closing until all terms of the loan are clearly understood.

8. Work with credit counselors. A borrower should get all the facts before deciding to combine credit card or other debts into a home loan. Beware of scam credit counseling/ credit consolidation agencies – unfortunately, not all credit counseling agencies are acting in your best interests. Talk to a community based consumer credit counseling agency or housing counselor before signing the loan documents.

9. Protect home equity. If borrowers are taking equity out of their property, they should take out the minimum amount needed. The equity in a home is a source of wealth, which builds up slowly over time.

10. If you're not sure, don't sign! Get advice first! Talk to a community based consumer credit counseling agency or housing counselor.

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