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The Great American Mortgage Scam & The Latino Community

March 15th, 2009 · 21 Comments

This is the first of a two part series on the foreclosure/banking crisis and the Latino Community.

The Latino community has been one of the hardest hit by the recent foreclosure crisis. A recent Pew Center report indicated that nearly one in ten Hispanic homeowners say that they have missed a mortgage payment or were unable to make a full payment in the last year. In addition, 3% say that they have received a foreclosure notice according to the Pew Center survey, and over a third of those surveyed are worried that their home may go into foreclosure.

Back when credit was easy just a few years ago, many Latinos along with other Americans were lured into the American Dream of homeownership by easy mortgages and the notion that real estate and home prices were only headed up. Sure, many people were misinformed and did not fully comprehend what exactly they were buying or signing their life away for, but some groups were aggressively targeted by slick marketing and other tactics designed to encourage home purchases. And some people were just careless with their finances assuming that they would be able to make payments on mortgages that would eventually readjust.

One obvious indicator that should have tipped off policy makers about the impending housing bubble and mortgage crisis was the national average wage. Since about 1973, median home prices have risen more quickly than have wages, and since Latinos typically earn less than their white counterparts, the prospect of homeownership became even more risky. In the five years from 2000-2005, the median American family’s income slid by 2.9% in contrast to a gain of 11.3% experienced by American families in the second half of the 1990s. During that same period, wages in Hispanic and black families fell by even more. However, corporate profits rose from 17.7% in 2000 to 20.9% in 2003.



Early in George W. Bush’s first administration, a home ownership initiative was introduced, sometimes referred to as the Blueprint for the American Dream, to close the homeownership gap by 5.5 million minority families. Along with this homeownership initiative, there were other policies implemented to dismantle barriers to homeownership in minority communities. In December of 2003, President Bush signed into law, the American Dream Downpayment Act, which incorporated three steps to broaden the homeownership. The first rule was to warn buyers about mortgage costs up front so that they could make informed decisions about their purchase. Funds for home counseling services were doubled (some funds went to faith based groups to provide such counseling). The second rule was supposed to make it easier for home buyers to decipher closing costs, and the third rule was to make the paperwork for home loans easier to read.

Around the same time, Fannie Mae and Freddie Mac increased lending efforts to minority families. For instance, Fannie Mae changed loan underwriting guidelines to remove some of the barriers that immigrants encounter such as “denial of credit because of inadequate or short credit histories, reliance on communal funds for downpayment money, and language and cultural issues.” Fannie also pledged to reach out to faith based groups and minority churches to fund mortgages for their congregations. Freddie sought to implement “cross-border credit” where credit histories from banks in borrower’s home countries could be submitted as valid documentation for home loans. It’s odd that Freddie would honor credit histories from other countries, especially those that might have higher levels of fraud than here in the US.

In the fall of 2003, the Congressional Hispanic Caucus Institute was launching its own homeownership program, the Hogar Housing initiative. If you try to find information about Hogar on the CHCI website, you will notice that they have removed most references to this program. Just visit Xicanopwr.com, and note the links that are now broken referenced in this article. The Hogar initiative had three components: a fellowship program to increase Latino leadership in the housing sector, housing community events to increase consumer literacy and understanding of the mortgage process, and research and analysis addressing homeownership barriers that Latinos face.

The Congressional Hispanic Caucus Institute‘s Hogar Advisory Committee included some high profile people of the banking and housing sector including representatives from Washington Mutual, the National Council of La Raza, the Executive Director of NALEO, Congresswomen Ros-Lehtinen and Velazquez, and former HUD Secretary and CEO of American City Vista, Henry Cisneros. Hogar Sponsors included the following entities: Fannie Mae, Freddie Mac, Citigroup, HSBC, Countrywide Home Loans, PMI Mortgage Insurance Company, State Farm, Washington Mutual, Wells Fargo Home Mortgage, Chase Home Finance, New Century Financial, G.E. Consumer Finance, and Ameriquest.

Two months ago, The Wall Street Journal reported on Hogar’s ties to the subprime industry. Specifically, companies that donated $150,000 could place a research fellow to conduct Hogar’s studies to be used by the mortgage and housing industry lobbyists. For donations of $100,000 per year, Hogar would provide press releases from the Congressional Hispanic Caucus to promote a particular lender’s products to the Latino community.

Some of the sponsors of the Hogar Initiative are no longer in business. One sponsor, Ameriquest, had a history of being sued for predatory lending practices as far back as 1996 and even paid $3 million into an educational fund to settle a Justice Department law suit. In 2005, Ameriquest announced that it has set aside $325 million to settle attorney-general investigations in 30 states. Some of the allegations against Ameriquest included preying on borrowers with hidden fees and ballooning payments. In May 2006, Ameriquest announced that it would close all of its retail offices.

New Century and its related entities filed for bankruptcy in the spring of 2007 seeking relief under Chapter 11. About a year ago, a report by a bankruptcy court examiner found “significant improper and imprudent practices related to its loan originations, operations, accounting and financial reporting processes.”

Chart credit: Forbes.com

To be continued…

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Tags: Congressional Hispanic Caucus · Economics · GWB · Henry Cisneros · Rep. Nydia Velazquez

21 responses so far ↓

  • 1 Reyfeo // Mar 15, 2009 at 6:52 pm

    Here is my issue with the Pew Report and the title of your blog.

    First the report you reference is “based on a bilingual telephone survey of a nationally representative sample of 1,540 Hispanics ages 18 and older.”

    This means its a very bad sample if you are trying to show that “Latinos” are really in bad shape. All you have here is a phone survey/sample which is really not a concrete validation of how or if Latinos are in as bad a shape as they say they are. It’s all perception.

    Also, the Pew report you reference says: “The terms “Latino” and “Hispanic” are used interchangeably in this report, as are the terms “foreign born” and “immigrant.””

    Second “Latino” doesn’t imply “American Citizen”. The PEW calls 1500 plus “Latinos” and then fails to distinguish between which are illegally here with mortgages?. And instead prefers to call them “foreign born”? Give me a BREAK! This is why no one takes us seriously!!! We lump all “Latinos” together and then try to tell America we are in trouble?

    What we need is a report that distinguishes Illegal Aliens and how many American citizen Latinos are in trouble with their loans. I’ll at least know how many of the Illegal alien” mortgages my grand kids are going to have pay in paying back this crazy bailout money! My point is, I don’t care about “foreign born” persons if they aren’t American Citizens to begin with, they shouldn’t have bought a home here without proper citizenship/visas to begin with.

    Also, and this one is a big one with spinning the perception in favor of more regulation: “When asked about who is to blame for the current economic financial crisis, Hispanics cite …and the lack of adequate government regulation of financial institutions (67%).”–Of course they do, these are the “foreign born” (psst! Illegal Immigrants) who didn’t want any regulation when they, under the covers, bought a house way out of their income range.

    The report also shows how the “foreign born” are now sending less money (remittance) to Mexico and or Central America. Really? Who cares! What’s funny is this new Administration is going to help pay for these Illegal’s mortgages so they can send our money (the extra they’ll have I mean) to Mexico and or Central America. What a crazy world we live in.

    Lastly, every one of the cited efforts to help “Latinos” more easily acquire loans to own homes came from a Democrat sponsor. Democrats were in bed with the very institutions they know chastise and then blame the previous administration for the lack or regulation? Really folks, lets start reading through the BS.

  • 2 webmaster // Mar 15, 2009 at 8:41 pm

    Reyfeo,

    Governor Schwarzenegger is “foreign born” or “immigrant.” You can be foreign born, but have gone through the naturalization process. I would bet that most of the people answering the Pew survey were legal because undocumented people tend to be transient and don’t give out information about themselves for fear of being reported to law enforcement or ICE. Not everyone who is “foreign born” is illegal.

    One of the biggest efforts to lend to Latinos and other minorities was initiated by a Republican, George W. Bush. People in both parties have been at fault here. One of the Congresswomen named in this piece, Ros-Lehtinen, is a Republican last time I checked. I don’t know whether she sponsored a housing/lending bill, but she was on the Hogar advisory committee.

  • 3 Reyfeo // Mar 16, 2009 at 6:32 am

    You said, “Not everyone who is “foreign born” is illegal. ”

    The counter can be said about your statement.
    -Not all foriegn born are legal citizenz.- (which is probably more true than your statement)

    And so, I agree WITH EXCEPTION, which is my overall point. This was a phone survey webmaster. Your statement: “I would bet that most of the people answering the Pew survey were legal because undocumented people tend to be transient and don’t give out information about themselves for fear of being reported to law enforcement or ICE.” is a HUGH ASSUMPTION. These people are having children here. They have bought homes here. The PEW doesn’t dilineate between what “foriegn born” is, legal US citizen or not.

    Is this really how we’re going to represent the US Citizen “Latino” problem with mortages in or about to be in default? Are we really going to mix us all (legal and illegal) together and say we have a problem with “scam” mortages in the “Latino” commuity and expect our White, Black etc Amercian brethren to take us seriously…we scew the perception when we do and it says we like lump all Latino issues together and we shouldn’t. There 12 million illegal aliens living among us, their problems are not out ours, if anything they compound perceptions about the Ameircan Citizen Latino. There is a defference.

  • 4 BettyM // Mar 16, 2009 at 3:24 pm

    Very interesting article. Too bad that the “American Dream” of owning a home will become harder for most minorities. I heard a commerical on TV recently that said now was the time to buy…..great homes at reduced prices.
    Wages for most minorities will decline and even though prices will be reduced they will not be able to afford those homes.

  • 5 wendy carrillo // Mar 16, 2009 at 6:10 pm

    great post, understanding demography is a complicated issue.
    The Pew does a very good job in aggregating numbers.
    I am a foreign born naturalized citizen, 1.5 generation (new concept), english dominant, college educated, latina female.
    i’m sure i can continue to add categories.
    It is unfortunate that the economic climate is allowing for finger pointing at the expense of minorities.
    Do you blame the homeowners for being in foreclosure or do you blame the banks who offered them the loans?
    The banks have a responsibility to hold ethical standards in conducting business, instead they over hyped mortgage lending practices and extended loans to people that should not have qualified.
    But it was allowed to create a housing boom that generated a false sense of returns.

    Reyfeo – seriously? you’re lack of tact and overall mentality towards legals and illegals is disheartening. Why don’t you get your own blog and rant and rave about how much you hate “illegals” somewhere else? You take away from the larger conversation.

  • 6 Anna // Mar 16, 2009 at 8:02 pm

    Re: “Second “Latino” doesn’t imply “American Citizen”. The PEW calls 1500 plus “Latinos” and then fails to distinguish between which are illegally here with mortgages?. And instead prefers to call them “foreign born”? Give me a BREAK!”

    Actually, on this point you and I agree. Whenever I read statistics about Latinos, I take them with a grain of salt. I am interested in stats on native born or naturalized, English speaking Americans of Mexican descent. These surveys lump us in with people who are here illegally, people from the Caribbean, etc. That just skews the data.

    But I don’t agree with the rest of your tirade slamming illegal immigrants as if they aren’t even people.

    You have a big border wall embedded in your brain. :)

  • 7 Mexitli // Mar 16, 2009 at 8:42 pm

    No one forces anyone to buy beyond their means. Personal responsibility is the issue here as it is with all those who bought homes they could not afford.

    Credit default swaps and marked to marked are the two main reasons for people defaulting on their home loans. Although, marked to market is better at valuation that letting bureaucrats and politicians decide what value is.

  • 8 Mexitli // Mar 16, 2009 at 9:04 pm

    “Back when credit was easy just a few years ago, many Latinos along with other Americans were lured into the American Dream of homeownership by easy mortgages and the notion that real estate and home prices were only headed up.”

    Can anyone name a year when home prices did NOT go up in SoCal? I’m 49 years old and I do not remember a year that home prices in SoCal did not go up.

    Mortgage payments became difficult to make because the entire economy took a chit.

    That always hurts minorities more, especially workers over small business owners. Investors, however, seem to be immune so far.

    I’d like to buy this:
    http://www.mbusa.com/mercedes/#/futureModelsEclass/

    Do you know I don’t? Because I cannot afford it.

  • 9 Michaelr // Mar 16, 2009 at 9:18 pm

    California home prices reversed themselves in the 1980-1983, and 1990-1992, when the U.S. economy took a “chit.” I don’t think any children are reading this blog, so it’s okay to spell “shit” correctly.

  • 10 Mexitli // Mar 16, 2009 at 10:23 pm

    I bought my first home in ’83 – CalVet. In ’80-’83 the economy was still recovering from stagnation. I was in college and working at the time, so was my Ex. We bought in Alhambra, CA on 8th street directly accross Moore field. Prices did not “reverse” themselves – prices went up. As for ’90-’92 I do not think so, not in SoCal. That was a short lived recession.

  • 11 Mexitli // Mar 16, 2009 at 10:24 pm

    SP “Across.”

  • 12 WhatThe.. // Mar 17, 2009 at 2:09 pm

    I was reading a January 11th article on this site regarding Joe Baca and subprime loans. It states, according to the article, that the Hispanic Caucus under Joe Baca launched a housing inititive HOGAR, in order to increase mortgage lending to Latinos. During the height of the housing boom, an advocacy group, Latino Affairs for the Center of Responsible Lending approached the Hispanic Caucus with stats indicating that many Latinos were being steered into risky and expensive subprime loans. It appears that the Hispanic Caucus denied her request to present her data. It seems that Joe and the Hispanic Caucus turned the other cheek, possible for receiving campaign contributions from some of these housing companies. Congress people are suppose to be the watchdogs in our society, and are there to protect the community from shady dealings. Does anybody have any thoughts on this.

  • 13 Michaelr // Mar 17, 2009 at 7:31 pm

    See the blog titled “Did Joe Baca and the Congressional Hispanic Caucus encourage Latinos to buy bad mortgages? January 11, 2009. That was certainly my take on what happened. And knowing Joe Baca for what he is and what he represents, there was no doubt he and others in the CHC exploited their constituents. However, there are several Congressional Hispanic Caucus apologists who frequent this blog and twist this and say that.

  • 14 H. Martinez // Mar 17, 2009 at 9:00 pm

    Very good post. The fact is that there were shady banking practices that went unchecked, and even abated by some (Whites and Latinos). It’s a shame that people today can’t get past the finger pointing, semantics about legal status, and outright racist views. The truth is that banks did not act ethically, broke the law in many cases and were aided by powerful political allies. This in turn contributed to the housing boom, the credit bust and the sale of toxic loans to banks around the world. All of this helped precipitate the recession we are in today. Oversimplified yes, but that’s the general order of the way things happened.

  • 15 The Great American Mortgage Scam and the Latino Community, Part II // Apr 1, 2009 at 11:26 pm

    [...] This is the second part of a two part blog post detailing how the Latino leadership was involved in the foreclosure crisis. If you need to be refreshed, part one is here. [...]

  • 16 Eva Oummo // Jun 3, 2009 at 10:48 am

    In my neighborhood in Falls Church, VA, many of the homes were purchased by Latinos and illegal Latinos (we know because we asked them in Spanish).

    Unfortunately, almost all of the homes turned into slum hotels for transient day laborers. It got so bad that Fairfax County had to set up and the vastly expand a housing zoning violation task force.

    For about two years, huge areas had turned into slum. It happened overnight.

    Fast forward to today. Almost every single home that was purchased by a Latino is now foreclosed and resold (to non Latinos).

    Property values are actually now going up. Streets are now trash free again. Petty crime and graffiti has returned to it’s normal level – NONE.

  • 17 Gutierrez Launches Text ?Reform? for Just, Humane Immigration Reform - Illegal Immigration - Page 4 - City-Data Forum // Dec 9, 2009 at 10:14 pm

    [...] why not, blame the housing debacle on the undocumented, LOL, this is unbeleivable OMG!!!!!!!! The Great American Mortgage Scam & The Latino Community The Latino community has been one of the hardest hit by the recent foreclosure crisis….. One [...]

  • 18 » Rush Limbaugh: Putting the GOP & Conservatives in Harms Way… - Blogger News Network // Dec 14, 2009 at 5:29 am

    [...] Over the past year, Rush, you have put all of the blame on Barney Frank, Chris Dodd and the democrats for this crisis when you had to have known that the Bush/Rove team, too, was involved neck deep in the process of relaxing the mortgage lending rules and underwriting guidelines!  [...]

  • 19 Sen. Chris Dodd to call it quits tomorrow // Jan 5, 2010 at 10:34 pm

    [...] to the mortgage mess. I encourage you to read these two blog posts that I wrote early last year: The Great American Mortgage Scam & the Latino Community and The Great American Mortgage Scam & the Latino  Community, Part [...]

  • 20 Midweek Update // Jun 23, 2010 at 7:23 pm

    [...] blogged about the mortgage and foreclosure crisis last year as it relates to the Latino community here and [...]

  • 21 Midweek Blog Update in the Latino Political Realm // Aug 25, 2010 at 9:29 pm

    [...] about the foreclosure crisis in relation to the Latino community last year in a two part blog post here and here if you are [...]

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