Refinancing a mortgage is an overwhelming process. Consumers have little choice but to depend on lenders to guide them to the appropriate solution. Unfortunately, unscrupulous lenders sometimes violate this trust and take advantage of borrowers or homeowners.

This was the case for Joseph and Cecila Smith*. The Smiths were both elderly and on a fixed income. After struggling to keep up with mortgage payments, the couple decided to refinance their home in 2005. Mr. Smith was told during discussions that he had signed a fixed-rate mortgage.

The lender actually presented Mr. Smith, who is a disabled veteran, with an adjustable-rate mortgage; interest rates on adjustable-rate mortgages are subject to drastic fluctuations over the course of the loan. Because he was disabled, Mr. Smith was unable to read the mortgage statement himself, and Mrs. Smith asserted the contract was never read aloud to either one of them. Unwittingly, the couple had entered a predatory-lending scam.

For a period of time, the interest rate was stable, and the Smiths had no difficulty making the monthly payments. However, two years after they refinanced, the Smiths’ interest rate “adjusted” and increased. Their monthly payments became substantially higher and were unaffordable. The bank threatened to foreclose on the home the two had lived in for almost 40 years. When the couple tried to cancel the contract as provided by law, the bank insisted they were too late to do so.

Ann Reese

Without alternatives, Mr. and Mrs. Smith turned to The Legal Aid Society of Cleveland for assistance; Legal Aid’s Consumer Law Unit, currently fully dedicated to foreclosure assistance, preserves the rights of homeowners and helps save communities. Anne Reese, a staff attorney at Legal Aid’s Ashtabula office, represented the couple. With careful investigation, Ms. Reese discovered that the bank had indeed misled Mr. and Mrs. Smith; the contract still allowed time to renegotiate the mortgage terms. Ms. Reese filed a foreclosure defense and raised equal-credit claims, arguing that the lender discriminated against the Smiths because of their age. In the end, Ms. Reese got the bank to charge off the loan, so the couple no longer had to pay the high interest rates. Ms. Reese was pleased with the result, calling the verdict a “good outcome.”

This is one example of many homes saved through Legal Aid’s foreclosure-prevention efforts. Legal Aid is a partner in “Save the Dream,” a statewide initiative that mobilizes Ohio’s legal community – Legal Aid attorneys, private attorneys, bar associations, the Supreme Court and the Attorney General’s office – and matches attorneys with low-income borrowers. This program has saved more than 3,220 Ohio homes from foreclosure during the past year.

* Name changed to protect client’s confidence