KENTUCKY STATEWIDE DON'T BORROW TROUBLE^SM CAMPAIGN LAUNCHED TO PREVENT PREDATORY LENDING

Lexington, KY – A coalition of 29 private and public organizations including Freddie Mac (NYSE: FRE), Kentucky Housing Corporation, the Attorney General's Office and the State Treasurer's Office today launched a major public education campaign aimed at preventing predatory lending throughout Kentucky. The organizations have established a toll-free consumer help line that will be staffed by trained professionals who can offer free information and referrals to individuals seeking information about purchasing a home, refinancing, consolidating debt, taking out a home-equity loan, and mortgage foreclosure prevention. Individuals can be referred to appropriate legal or financial experts.

The Kentucky Don't Borrow Trouble^SM campaign utilizes brochures, the www.dontborrowtrouble.com Web site, billboards, and radio public service announcements to educate consumers who are most vulnerable to predatory lending – 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 help line at (866) 830-7868, after November 1. 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.

"When I think about the impact predatory lending has on Kentuckians, I recall the impact it nearly had on a member of my own family," said Ben Cook, chief executive officer of Kentucky Housing Corporation and chair of Kentucky's Don't Borrow Trouble task force. "Many people do not understand the lending process and can be easily intimidated. Kentucky Housing Corporation is proud to play a lead role in Don't Borrow Trouble, which helps arm consumers with accurate information so they don't become victims of predatory lending."

"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."

"This campaign has the very laudable goal of protecting Kentucky taxpayers from predatory lending practices," said Kentucky State Treasurer Jonathan Miller. "I am proud to be a member of the Don't Borrow Trouble coalition."

"For most of our citizens, the home is their most valuable possession," said Kentucky Attorney General Greg Stumbo. "Unscrupulous lenders and home improvement contractors prey upon our vulnerable citizens, particularly the elderly, by engaging them in a cycle of high cost loans that cannot be repaid and often result in foreclosure. Consumer education efforts like these are critical to warning our citizens and stopping predatory lending practices."

Additional organizations participating in this campaign include: American Association of Retired Persons, Administrative Office of the Courts, Americana Community Center, Better Business Bureau (Lincoln Trail Area Branch), Chase, Sanders & Associates, Semonin REALTORS, Citizens Union Bank, Federal Reserve Bank of St. Louis, General Motors Acceptance Corp., The Housing Partnership, Inc.; U.S. Department of Housing and Urban Development – Louisville, Kentucky Division of Aging Services, Kentucky Commission on Human Rights, Kentucky League of Cities, Kentucky Real Estate Commission, Lexington Fair Housing Council, Lexington-Fayette County Urban League, Lexington-Fayette Urban County Human Rights Commission, Louisville Metro Department of Housing & Community Development, Louisville Urban League, Mountain Association for Community Economic Development, Office of Financial Institutions – Kentucky, Office of Kentucky Legal Services Program, Residential Mortgage Services and Seven Counties Services, Inc.

Predatory lending practices strip equity away from homeowners. A few examples are 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 when 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.
    

###