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San Francisco Latinos Pick Up Pieces After Foreclosure

Submitted by News Desk on Fri, 09/19/2008 - 3:13pm

SAN FRANCISCO, Calif. -- Three years ago, Carmen Ruiz, 51, of San Bruno, owed $3,000 on a second mortgage and needed help with sorting through her debt. When she asked her tax preparation aide for financial advice, he calmly reassured her, saying, “I know an angel who can help and I will send him to you.”

The "angel" came in the form of a crooked predatory lender posing as a church pastor. He promised Ruiz that he would eliminate her debt by refinancing her home—as long as she trusted him and didn’t tell anyone he was helping her.

He convinced Ruiz that he needed to take out her loan in his brother’s name (her credit was poor, he reasoned), and arranged for Ruiz to pay him back in monthly cash installments (he was too busy to cash checks at a bank, he claimed).

“He made me sign papers even though he knew I had a brain tumor and couldn’t see or read well,” Ruiz says. For an entire year, she sent him monthly cash payments, so she was shocked when her house suddenly went into foreclosure. Her “angel” had taken her money and fled.

It was at that point that Ruiz sought assistance from local organizations. Through the Mission Economic Development Agency(MEDA), a San Francisco-based organization that helps immigrant and working class Latino families, Ruiz met Jacqueline Marcelos, 38, of Bernal Heights, who was also a victim of housing fraud. Marcelos and her family had been swindled of equity worth $200,000. It took them two years and hundreds of hours of education and work to organize an investigation and get their district attorney’s attention.

Although the men who conned Ruiz and Marcelos are serving jail time now, both women are still fighting to hold on to their housing. “Up ‘til today, we still have not been able to find restitution for the theft,” Marcelos says. “The broker, the landlord, and the bank have all enriched themselves with government compensation for these fraudulent crimes…We demand dignity in housing.”

Subprime loans, which are made to borrowers who have bad credit, and predatory lending are the main forces behind the foreclosure crisis that is hitting the nation. There are 7.5 million subprime loan borrowers and $1.4 trillion in loans outstanding, according to a 2006 study conducted by the Center for Responsible Lending, a research organization and resource on predatory lending. About 40 percent of all subprime loans nationwide were issued to Latino households. An estimated 5,760 Latino families are projected to lose their homes due to foreclosures.

In San Francisco, the study projected a 16.7 percent foreclosure rate on subprime loans in 2006, which is a 462 percent increase over rates from 2000.

At a recent National Association for Latino Community Asset Builders (NALCAB) press conference on the foreclosure crisis within the Latino community, Rep. Linda Sanchez, of California’s 39th District, stressed the importance of working harder than ever to prevent financial exploitation of low-income communities of color, particularly during these hard economic times. The U.S. unemployment rate of 6.1 percent is the highest it has been in five years, she says.

The foreclosures all around California neighborhoods represent just the “tip of the iceberg,” Sanchez says. “The foreclosure rate we are looking at right now equals the rate of the Great Depression.”

Many Latino and African American homebuyers have been steered into predatory mortgages even though they qualified for cheaper mortgages, Sanchez says. In her district, which covers part of southeastern Los Angeles County, 31 percent of all loans issued between 2005 and 2006 were subprime loans, and over half of the families who received the loans qualified for lower interest rates on their mortgages.

The best way of combating the high foreclosure rate, Sanchez says, is combining new public policy with an education effort that would make low-income communities savvier in financial matters.

Two bills recently passed by Congress, the Housing and Economic Recovery Act and the Neighborhood Stabilization Bill, which intend to address the subprime mortgage crisis and help stabilize local communities, are steps in the right direction, but there’s no quick fix to the foreclosure crisis, Sanchez says.

The legislation, and the recent federal takeover of Fannie Mae and Freddie Mac, will secure lending capital for future loans for first time homebuyers, according to Jane Duong, home ownership program manager at MEDA. The requirements of getting these loans may be more stringent in the future, leaving many still vulnerable to predatory lending.

City Treasurer Jose Cisneros, widely praised for spearheading the Bank on San Francisco initiative, which has aimed to assist low-income San Franciscans open their first bank accounts, thinks many of the debt problems in the Latino community are banking-related.

“Individuals would receive their paychecks or benefit checks, go down to the cash checker where there was a line out the door, and pay exorbitant fees just to cash their checks—a service most of us do for free,” Cisneros says. Within the Latino and African American communities in San Francisco, half of all households don’t have bank accounts.

Language access is an issue for many immigrant families, says Bea Stotzer, Chair of NALCAB’s board of directors. Important bank documents should be translated into Spanish, and stronger penalties for predatory lenders and crooked brokers need to be instituted, Stotzer says.

“There is this ideological belief among some Congressmen, and I hate to say this, that poor people are poor because they don’t work hard,” Rep. Sanchez says. “Many poor people are the hardest working people in the world, and they pay more for everything, but Congress continues to pass laws that penalize them and reward more irresponsible [high powered corporations].”