The Housing Chronicles Blog: Hispanics a primary victim of mortgage fraud and foreclosures

Monday, January 5, 2009

Hispanics a primary victim of mortgage fraud and foreclosures

Having walked through model home complexes during the boom years when sales agents would attempt to explain sub-prime and Option ARM loans to Hispanic buyers who didn't seem to fully understand the ramifications of their signatures, I'm sure the procedure at the lender's office went something like this: "Just sign here. We'll fill out everything for you. Housing always goes up. Have a nice day!"

The problem with such irresponsible lending practices? Foreclosures. Lots of 'em. And it seems that part of the problem was due to other Latinos viewing an untapped demographic and creating their own version of ponzi king Bernard Madoff in order to earn fat commission checks. From a Wall Street Journal story:

For years, immigrants to the U.S. have viewed buying a home as the ultimate benchmark of success. Between 2000 and 2007, as the Hispanic population increased, Hispanic homeownership grew even faster, increasing by 47%, to 6.1 million from 4.1 million, according to the U.S. Census Bureau. Over that same period, homeownership nationally grew by 8%. In 2005 alone, mortgages to Hispanics jumped by 29%, with expensive nonprime mortgages soaring 169%, according to the Federal Financial Institutions Examination Council.

An examination of that borrowing spree by The Wall Street Journal reveals that it wasn't simply the mortgage market at work. It was fueled by a campaign by low-income housing groups, Hispanic lawmakers, a congressional Hispanic housing initiative, mortgage lenders and brokers, who all were pushing to increase homeownership among Latinos...

When the national housing market began unraveling, so did the fortunes of many of the new homeowners. National foreclosure statistics don't break out data by ethnicity or race. But there is evidence that Hispanic borrowers have been hard hit. In part, that's because of large Hispanic populations in areas where the housing bubble was pronounced, such as Southern California, Nevada and Florida.

In U.S. counties where Hispanics account for more than 25% of the population, banks have taken back 6.7 homes per 1,000 residents since Jan. 1, 2006, compared with 4.6 per 1,000 residents in all counties, according to a Journal analysis of U.S. Census and RealtyTrac data...

...a close look at the network of organizations pushing for increased mortgage lending reveals a more complicated picture...Lawmakers and advocacy groups pushed hard for the easy credit that fueled the subprime phenomenon among Latinos. Members of the Congressional Hispanic Caucus, who received donations from the lending industry and saw their constituents moving into new homes, pushed for eased lending standards, which led to problems.

Mortgage lenders appear to have regarded Latinos as a largely untapped demographic. Many were first or second-generation U.S. residents who didn't own homes. Many Hispanic families had multiple wage earners working multiple cash jobs, but had no savings or established credit history to allow them to qualify for traditional loans...

Mortgage brokers became a key portion of the lending pipeline. Phi Nguygn, a former broker, worked at two suburban Washington-area firms that employed hundreds of loan originators, most of them Latino. Countrywide and other subprime lenders sent account representatives to brokerage offices frequently, he says. Countrywide didn't respond to calls requesting comment.

Representatives of subprime lenders passed on "little tricks of the trade" to get borrowers qualified, he says, such as adding a borrower's name to a relative's bank account, an illegal maneuver. Mr. Nguygn says he's now volunteering time to help borrowers facing foreclosure negotiate with banks.

Many loans to Hispanic borrowers were based not on actual income histories but on a borrower's "stated income." These so-called no-doc loans yielded higher commissions and involved less paperwork...

These days, James Scruggs of Northern Virginia Legal Services is swamped with Latino borrowers facing foreclosure. "We see loan applications that are complete fabrications," he says. Typically, he says, everything was marketed to borrowers in Spanish, right up until the closing, which was conducted in English.

Click here for full story.


Anonymous said...

It is not just the fault of the banks but more on the persons actually selling these loans, I have been to so many homes where hispanic borrowers were lied to about what kind of loan they were getting and many did not evevn know they were getting 2 loans, from I have been told they are ususally surprised when the payment comes. The other thing I have seen happen is when these same companies pull cashout and givew the borrower only 5000 and then keep an additional 10,000 by telling the homeowner that a mistake was made and that too much money was wired to their account and they need to cut a cashiers check back to an individual they will name. Most of these companies are Hispanic companies that prey own people especially the ones with little or no education. But then again thats how they do it in Mexico too, Its no wonder Mexicans get a bad rap out here in the U,S, because 50% of the ones I have met in this buiness are crooked I wont deal with them. I am also Hispanic, 3rd generation. A Broker in Montclair Ca.

Anonymous said...

Actually, in Fairfax and Prince William counties, the housing collapse and meltdown was primarily a Latino experience.

Begginning in 2004, low income Latinos began purchasing expensive homes in the county. By 2006, Fairfax County set-up a special task force enforce zoning violations. Most of the homes purchased had become boarding homes for dozens of illegal latino immigrants.

By 2007 Fairfax county had expanded zoning enforcement by 2007 to combat widespread overcrowding, trash, building code violations. Many neighborhoods had begun to resemble shanty towns filled with illegal immigrants.

By 2008, the flood of foreclosures began as payments reset on the unaffordable mortgages. By late 2008, 1000's of newly arrived Latino's had their homes foreclosured. Trash, overcrowding, sexual assaults all dropped. The sun began to shine again.

Unfortunately, the massive mortgage fraud conducted by the Latinos began to have a negative affect on home prices, starting the spiraling down we see today.