John Beale, Post-Gazette Alonzo Hardaway has been staying at the East End Cooperative Ministry Homeless Shelter in East Liberty since being evicted from his Penn Hills home. Click photo for larger image.

When it's late spring and the sun is out and Alonzo Hardaway daydreams, he thinks about grilling steaks in the yard of his Penn Hills home.

But that home, the home where he raised a family, got divorced and where his parents died, is no longer his.

In 1999, a home remodeler convinced Hardaway to take a home equity loan for $30,000 at 13 percent interest to redo the kitchen, windows and doors. The loan was with The Associates, a large subprime lender later bought by Citigroup, which two years ago paid $215 million in fines on federal charges of unscrupulous lending by its Associates subsidiaries.

Hardaway, 56, didn't balk at the high interest rate, and when, in rapid succession, his trash hauling business faltered, a court ruling forced him to pay overdue child support and several years of tax liens came up for collection, he defaulted on his loan.

His home of 28 years was sold at sheriff's sale last year. He was evicted in March and has been staying at a homeless shelter.

	John Beale, Post-Gazette Hardaway is approached by Shawn Hall of Deliverance Baptist Church in Wilkinsburg, which he used to attend. Hardaway often passes time on the sidewalk outside the shelter that is now his home. Click photo for larger image.

Hardaway was the victim of a predatory loan, the name given loans that feature deceptive marketing, excessive fees and insurance, high interest rates and balloon payments.

Loans are known as either conventional or subprime. The latter differ from the former in that the borrower pays a higher interest rate and fees to compensate for a poorer credit history.

Predatory loans are a type of subprime loan that target the elderly, minorities, low-income homeowners and individuals who may not have the financial skills to ferret out a bad deal.

According to Hardaway, in his case there was another factor.

"When you have an opportunity to have something and have something nice, and someone dangles this and says, 'I'll do this for you,' you don't think in terms of what the mortgage is," he said.

"You don't think about, 'What if I get sick?' You don't care. It was greed."

Although Hardaway owns two other homes in Swissvale and Wilkinsburg, both have multiple liens against them for unpaid county, municipal and school district taxes. The water has been shut off in one; the other, a duplex, has tenants.

	John Beale, Post-Gazette Hardaway was unemployed until he got a part-time job working for Allegiance Staffing in East Liberty. Click photo for larger image.

Hardaway, who has hypertension, high cholesterol and an irregular heartbeat, hopes to earn enough money to satisfy his bills and still have a home to live in for his retirement. Last year he filed Chapter 13 bankruptcy.

He's not alone in his predicament.

In Allegheny County, the overall dollars lent by subprime mortgage companies increased nearly 200 percent from $124 million in 1996 to $365 million in 2001.

Fewer than 17 percent of all subprime loans were used to purchase homes; the vast majority went to refinance debt.

The Pittsburgh Community Reinvestment Group is a consortium of two dozen community organizations representing more than 50 primarily low- and moderate-income county neighborhoods. Its research shows that in 2001, about 29 percent of borrowers in low-income neighborhoods and about 49 percent of borrowers in low-income African-American neighborhoods received mortgage financing from a subprime lender.

Of the top 25 Pittsburgh neighborhoods for subprime lending, all but three (West End, Esplen and Spring Garden) are neighborhoods with a substantial minority population.

	John Beale, Post-Gazette A predatory loan was Hardaway's undoing. Click photo for larger image.

On the other hand, of the 25 city neighborhoods with the lowest level of subprime lending, only three (Arlington Heights, Strip District and Point Breeze North) have a substantial minority population.

"The current practices of the subprime mortgage industry are simply irresponsible and detrimental to our neighborhoods," wrote Greg Simmons, PCRG's program manager in the forward to group's February publication "Disparities in Lending: A Study of Subprime Lenders in Pittsburgh and Allegheny County."

"Borrowers are regularly obtaining mortgages they cannot maintain over the long term, and lenders are making loans they cannot possibly collect."

One factor behind the growth of subprime loans has been their attractiveness as investments when pooled together in large groups known as mortgage-backed securities. Some of these are backed by government agencies such as Fannie Mae, the country's largest source of financing for home mortgages. These provide a way for smaller regional banks to lend mortgages to customers without worrying whether they have enough assets to cover the loan.

	Click photo for larger image. HARDAWAY HOME Problem: Took home remodeling loan at high interest rate and couldn't meet payments. Status: Working temporary jobs to pay back child support and tax arrears on Swissvale and Wilkinsburg homes he owns and hopes to save. Quote: "I still haven't gotten over it."

Other mortgage-backed securities, however, are underwritten by large banking and financial services organizations such as Household Finance Corp., which, along with its subsidiary Beneficial Corp., are wholly owned subsidiaries of the Hong-Kong Shanghai Bank Corp .

Household Finance does not offer conventional mortgages, only subprime. Based on Household Finance's description on its Web site of one such security it offered through parent bank HSBC containing 8,051 loans, nearly half the borrowers in the security could have qualified for conventional prime-rate financing.

Locally, at least two banks -- National City and PNC -- have invested in mortgage-backed securities portfolios held by HSBC.

A PNC spokesman said about a third of the bank's $16.9 billion investment portfolio is made up of mortgage-backed securities, "all of which are highly rated by Moody's and Standard & Poor's," two of the country's leading providers of financial analysis.

A National City spokesman said that while the bank takes appropriate steps to avoid "distasteful elements" in investments, few companies the size of HSBC have "a completely clean slate."

While it's a long way from such multi-billion-dollar investments to borrowers such as Hardaway, PCRG's Simmons believes the best way to stop abusive lending practices is to demand improvements in the system or withdraw capital from companies with loose origination standards.

Otherwise, he said, predatory loans will continue to flourish.

"As recently as five years ago, some neighborhoods were not touched," Simmons said. "Now, there's no area that hasn't been affected. It's going to get worse in the next couple of years."

Hardaway doesn't think it could get worse for him. For someone who believed he was "living the American dream," being forced to stay in a men's shelter was humiliating.

Holding on to his other two properties is paramount, he said, despite the money he owes. He's trying to get his car fixed and a social worker is helping him resolve the overdue water bill. He's even returned to church after an absence of several years.

"I'm still trying to maintain a view that this is temporary," he said.