Predatory lending impacts some groups more than others.
Home-buying Hispanics are more likely than Anglos to fall prey to high-interest loans, according to a national report released last week.
Numerous reasons are cited in the report by The National Council of La Raza for Hispanics' vulnerability to what's called "predatory" lending practices. The reasons include credit issues, a tendency to purchase mobile homes and a lack of familiarity with the home buying process.
Although The New Mexico Attorney General's Office does not keep data on home buying trends, Joel Cruz-Esparza, director of the AG's consumer protection division, says he is aware of dubious lending practices in the home buying market. "I could easily see how Hispanics would be targets for predatory lending in the sense of the level of education and also the level of knowledge of how the system works," Cruz-Esparza says. "But I could also tell you it affects Native Americans. I can very easily make a conclusion that it affects poor people in general, including Anglo poor people."
The AG's office has received complaints from consumers about predatory lending but Cruz-Esparza says they compose a small number of occurrences of the practice in New Mexico. "Believe it or not," he says, "many people don't know that they were defrauded or misrepresented."
Santa Fe organizations aimed at providing the community with affordable housing caution home seekers against too-good-to-be-true loans. Homewise Community Outreach Coordinator Andrea Slatopolsky educates consumers about housing rights via Proyecto Vivienda Digna (Living with Dignity)-a joint project between Homewise, The City of Santa Fe and immigrant advocacy group Somos Un Pueblo Unido. "Most people come in here and don't realize their rights have been violated," Slatopolsky says. "Sometimes they think what's happened is unfair, but they have no idea it's illegal." In particular, Slatopolsky says clients have been asked to provide nonrefundable deposits to brokers who claim they can find them homes. In most cases, the homes in question are mobile or manufactured, homes. "This often happens with Spanish-speaking customers who don't realize they can buy a stickbuilt home," Slatopolsky says. "They're meeting up with mobile home brokers who are really unscrupulous."
According to NCLR, about one in 10 Hispanic homeowners live in mobile homes. "Most of the time, banks do not give loans for the purchase of mobile homes because the value of mobile homes decreases as time goes on versus financing a regular home where the value goes up," Cruz-Esparza explains. Because banks typically shun mobile homes, those who seek to buy them have to turn to dealers akin to those in the automobile market for financing. "By simply purchasing a mobile home instead of a regular house, they end up with higher percentage rates," Cruz-Esparza says. In fact, NCLR cites a Texas study in its report in which mobile home buyers had to pay interest rates between 9 and 13 percent higher than the average rates for a standard home.
In Santa Fe, the high cost of living and lack of affordable housing appears to be driving segments of the community into mobile homes. Luke Rodriguez, a Casita Mortgage broker, says a few years back the company lost a significant amount of business to the manufactured housing boom. He considers the lending practices for such homes to be entirely different from those for standard homes. A representative for Fleetwood Homes, the only mobile home dealer listed in the Santa Fe Yellow Pages, refused to be interviewed for this story. The representative did deny, however, that mobile home buyers pay disproportionately high interest rates for home loans.
Slatopolsky, for one, aims to inform low-income people that they have options beyond mobile homes. With help, she says, Santa Fe's working class can find standard housing that is affordable. The difference may be that while a mortgage broker would negotiate a loan for someone with poor credit, a counselor who provides homebuyer education would encourage the client to wait. "We work really hard at helping people get their credit clean," Daniel Werwath, a counselor for Santa Fe Community Housing Trust, says. "We try most of all to help people get their credit in the best shape possible before they start working with lenders."
In addition to repairing credit, Janis Bowdler, author of the NCLR housing report, says home seekers should not enlist the services of those who stand to gain financially when trying to a secure a home loan. "You should seek a nonprofit community organization," she says. Bowdler also encourages shopping around for loans. "The key thing is not to feel pressured," she advises. "You have the right to rescind a loan three days after signing. A lot of people don't know until it's too late, until they're facing a foreclosure."
