Home Equity Loan Scams Target Elderly : Consumers: Stricter laws are needed to protect unwary low-income borrowers from foreclosures, activists say.

After the Northridge earthquake in 1994, Wilna and Joe Evans did not think their Crenshaw district house suffered much damage. But they were happy to get help when a man appeared on their doorstep to offer them financial assistance for minor quake damage and other long-overdue repairs to their 20-year-old home.

The couple say they did not realize that when they signed an $18,000 lien contract for those repairs, they were giving an independent contracting company authority to foreclose on their home if they failed to meet just one of the $338 monthly payments.

Although the Evanses were able to get out of the contract with the help of Bet Tzedek Legal Services, officials said Wednesday that many other elderly and low-income people fall victim to contractors who hide high fees and interest rates in loan agreements.

A report called “Dirty Deeds: Abuses and Fraudulent Practices in California’s Home Equity Market,” released by Consumers Union, a nonprofit consumer advocacy group, documents cases in Los Angeles, San Francisco and Oakland where unsuspecting homeowners were duped into signing over the equity of their houses for high-interest loans with low monthly payments that were eventually replaced by high balloon payments.

The Los Angeles County district attorney’s office investigates 60,000 alleged fraudulent loan cases each year, according to the report.

Victims of the loan scams are often senior citizens with fixed incomes and high equity on their homes, or financially strapped homeowners, said Norma Garcia, author of the report.

Independent contractors, mortgage brokers and private investors will sometimes trick people into signing for home equity loans by promising them easy approval and low payments without explaining the contract terms, Garcia said.

Homeowners who do not understand the technicalities of loan or lien contracts can be seduced by such offers because they see an easy opportunity to fix up their homes or to buy time on other financial commitments, she added.

The tactics deplored by Garcia and others are legal. But at a news conference at the offices of Bet Tzedek Legal Services, which investigates unscrupulous lending practices in Los Angeles, Garcia said one purpose of her report was to persuade state lawmakers to make them illegal.

Garcia’s report recommends that lawmakers prohibit independent contractors from working in tandem with mortgage companies and that they lend greater support to a new law that will provide county prosecutors with greater resources to investigate fraudulent loans when it takes effect next year.

“More money is stolen by use of a pen than by a gun,” said Los Angeles County Dist. Atty. Gil Garcetti, who appeared at the news conference to support the new law. “We want to send a message to those who engage in real estate fraud that if you do this, you will wind up in prison.”

What makes some people a target, Garcia said, is the fact that mainstream lending institutions seldom approve loans to those who live in lower-income neighborhoods.

“Some institutions have first-time loan programs for people with limited resources,” she said. “The community would be better off if that happened more often.”