September 7, 2007

Many Latinos face foreclosure, due to high-cost loans

By Pablo Jaime Sáinz

Joaquina Abrego and her husband decided to refinance their National City home in August 2005, a home they were able to buy after many years of hard work.

The loan agent they consulted said he could lower their mortgage payment to $900 after refinancing.

“He said not to worry, that he was going to find me the best loan offer possible,” she said. “He said he was going to take care of all the paperwork.”

What followed was a disaster for the Abrego family: Their monthly payments turned out to be $3,700.

Because of the high stress that the high payments caused on him, Joaquina’s husband suffered a stroke.

That led to him losing his job, meaning the family couldn’t make the payments anymore.

Last month the house was put up for auction and it sold for a fraction of its price.

Joaquina’s dream of owning a house came to an abrupt end due to the unscrupulous loan agent, who never returned her calls.

Joaquina shared her story at a press conference this week where the national community group ACORN released a study that found that unaffordable loans disproportionately impact minority and low- and moderate-income families and neighborhoods, loans that have led to the foreclosure crisis that is going on in the nation.

“I admire Joaquina’s strength to continue in this campaign, even though she already lost her house,” said Paloma Aguirre, administrator of Chula Vista ACORN. “She really wants to prevent other people to go through what she went through.”

Joaquina’s is just but one of many Latino families that are facing foreclosure, due to high-cost purchase loan.

“We have seen a sharp increase in foreclosures in some of the urban and minority communities that most need to build wealth through home-ownership,” said ACORN National President Maude Hurd. “Too many of our neighbors were steered into unaffordable exploding Adjustable Rate Mortgages without being given the option of fixed-rate and now face foreclosure, which harms their families and our communities.”

The study, called “Foreclosure Exposure: A study of racial and income disparities in home mortgage lending in 172 American cities,” found that at the national level Latinos were 2.3 times more likely to be issued a high-cost loan than White borrowers, while African-American home buyers were 2.7 times.

“Obviously there’s discrimination against minority homebuyers,” Aguirre said. “Sadly, it’s a harsh reality.”

The study states that even when controlling for income, minority borrowers are more likely than Whites to be issued a high-cost loan and are therefore more likely to end up in foreclosure.

Upper-income minority borrowers are at higher risk of foreclosure than White borrowers regardless of income.

“Many people believe that borrowers end up with a bad loan because they were desperate for money and could not get any other loan,” ACORN said in a statement. “That is not at all what we have seen. Usually people are approached by a mortgage company or broker saying that they can get the homeowner a lower rate or money. They usually lie about the terms and conditions for the loans or just simply forget to mention that they could qualify for a better loan. This is not just a house but it is a home to a family. This foreclosure crisis is leaving families on the street and turning their dream of having a home a nightmare.”

For the San Diego metropolitan area, the study found that in 2006, 25 percent, or one out of four, home refinance loans made to Latinos were high-cost loans, and 30.9 percent, or nearly one out of three, home refinance loans made to African-Americans were high-cost loans.

In contrast, only 12.7 percent, or about one out of eight, home refinance loans made to Whites were high-cost loans.

“ACORN is attacking the problem by helping as many people as possible negotiate with their lenders to avoid foreclosure,” Joaquina Abrego said. “But legislators and banking regulators need to do their part to protect our communities from unscrupulous lending practices.”

ACORN is calling on lenders and servicers to modify loans so that they will be affordable to borrowers. ACORN is also calling on state and federal legislators to pass strong anti-predatory lending legislation that would protect consumers from abusive practices without pre-empting local legislation.

ACORN has many housing services available to help first-time home buyers and people who already have a high-cost loan. For more information visit www.acornhousing.org or 1-866-67-ACORN.

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