Massachusetts, Activists Take Aim at Practices of Subprime Lenders.

Byline: Kathryn Tong

Aug. 13--The market for loans to homeowners and home buyers with less than perfect credit has exploded in the last five years along with the incidents of abuse.

Consumer advocates, the federal government and the mortgage industry are fighting back and suing so-called "predatory lenders," who target low-income homeowners, minorities and the elderly with subprime loans they will never be able to repay.

"The problem has gotten a lot worse. These companies are expanding because this is such a profitable business. This industry is out of control," said William J. Brennan Jr., director of the Home Defense Program of the Atlanta Legal Aid Society.

But the lenders contend they are providing low-income homeowners with credit that they would not be able to obtain otherwise, and, they add, a small fraction of companies engaged in fraud are giving the entire subprime loan industry a bad name.

"Profit margins are not as good as people think they are," said Steve Nadon, executive vice president and chief operating officer of Option One, a mortgage lender based in Irvine, Calif.

And yet subprime loans increased from $35 billion to $160 billion dollars from 1994 to 1999, capturing 12.5 percent of the total mortgage market, according to the US Department of Housing and Urban Development.

The number of victims of predatory loans have increased along with the market, especially in Massachusetts. The Division of Banking is so concerned about the issue that it will…