Mr. Ferguson is retired on a fixed income, was diagnosed with dementia several years ago. He has a hard time remembering that he visited his daughter in Jamaica before she died of cancer two summers ago. While he moved to Brooklyn over 30 years ago, he often doesn’t remember the move from Jamaica via London. Karlene Grant, a cost accountant at a large Manhattan property management firm, is Mr. Ferguson’s daughter and manager of his financial and legal affairs.

In the beginning of 2006, a Long Island based Global Financial Inc mortgage broker talk Ferguson into a brand new $450,000 adjustable rate mortgage (ARM) that was sure to put his property in foreclosure. He was told that he could benefit from changing his fixed-rate 30-year mortgage at 5.95 percent interest into a refinanced mortgage with a teaser rate of 1 percent. His new, lower payment lasted about one week before it jumped to 7 percent, and kept going up.

Mr. Ferguson had now family member or attorney present with him in the office of Michael Bocelli at Global Financial Inc. In fact, he was quite happy with the deal as it was explained to him, and as much that an elderly man with dementia could understand. His total monthly income was listed as $1,100 on the loan application. Both the teaser rate and his new monthly payment at $1,480 should have been obviously higher than Mr. Ferguson could possibly afford.

BusinessWeek magazine calls ARM mortgages a ticking time bomb and the most complicated home loan product there is for everyone except the most financially savvy.

Bocelli, the broker, did quite well with the transaction with Mr. Ferguson. Besides his $6,675 broker fee, he received an additional $14,420 by IndyMac, the California based bank that gave Ferguson the loan. The fees were contingent on signing up Ferguson to a “No Income No Asset Loan,” which gives a higher interest rate. The paperwork from IndyMac instructed the broker, “The file must not contain any documents that references income or assets.” Ferguson has a couple of sources of income that is easily verified – social security and a pension.

He may or may not remember visiting with Bocelli that day due to his dementia. His Jamaican lilt encourages his gentlemanly nature of speaking, he regularly forgets things whether it’s important or trivial let alone recalling his new interest rate or how he’s possibly going to afford his new payment.

Housing advocates and attorneys use hunting terms such as “perfect targets,” “sitting ducks” or “easy marks” to describe the ways seniors were targeted by subprime lenders and brokers. In the subprime feeding frenzy of the last few years, black seniors with decades of equity in their homes were the lowest hanging fruit.

“They were the first wave,” says Josh Zinner, co-director of the Neighborhood Economic Development Advocacy Project, a Manhattan policy institute. “In fact it was only because so much equity was stripped from seniors that they started going after first-time homebuyers.”

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