Woman Loses Home After Agreeing to Loan

HARRISONBURG, Va., May 22, 2005 — -- A sunny afternoon playing with a granddaughter might seem like the picture of happy retirement, but for 61-year-old widow Wanda Smith, it's anything but: She lost her home in December.

"It was a home that my husband and I shared together and it was really hard to let it go," she said.

Last June, Smith was on disability and short on cash. Creditors were calling non-stop. She called First NLC, a California company, which offered her a loan that sounded almost too good to be true.

"They looked at her as someone they could take an advantage of, and they did," said Smith's attorney, Tom Domonoske.

Domonoske says the loan that was supposed to help her get out of debt actually increased it.

"A legitimate lender would have made her a $15,000 loan with a few hundred dollars or less in closing costs," he said. "This lender convinced her to refinance her existing first mortgage at a higher interest rate and charged her over $6,700 in closing costs."

Smith signed and agreed to every stipulation.

"I went back and I looked at all the papers, and there was something wrong," she said.

Six months later, she panicked and sold her home.

"What you saw with Ms. Smith is all too common," said Mike Calhoun, a consumer advocate. "Predatory lending is rampant in the United States today. We've done studies that show it costs households over $10 billion a year in lost home equity."

There are tough laws against predatory lending in about a quarter of the states. Many require a credit counselor to provide an explanation of the loan. Virginia does not. Calhoun said under Virginia's law, First NLC did not have a duty to explain the terms of the loan.

When ABC News contacted First NLC to ask about Smith's case, a spokesman provided a statement saying they have "strong pro-consumer policies" and believe their policies and all laws were followed. First NLC said it has "no record of a complaint" and "encourage[s] her to contact" the company directly.