How has she handled all this?
"I'm trying to keep my balance. My daughter was offering to help me. She has a perfect credit score, and she was offering to cosign for yet again another refi. But she's 23 years old, and I'm wondering what would be the risk for her." She laughs an embarrassed laugh. "It's a roller-coaster ride, and I'm hanging on by a prayer." Inez says she just wants "fairness. I want people to get what they ask for instead of being fooled into something again and not really respecting what we really want." Her advice for others before they buy a house is to use a credit union; find out about penalty charges; ask questions; get a fixed rate, never an adjustable.
The most recent map of San Diego defaults and foreclosures reveals that subprime loans are concentrated where ethnic groups -- Vietnamese, Filipinos, Mexican Americans, African Americans -- predominate. One of the major subprime lending areas is EastLake, a subdivision in Chula Vista with a large Hispanic population. Housing advocates wonder whether what has happened in EastLake is the result of brokers and lenders preying on people whose lack of English-language skills makes them susceptible to subprime abuses.
"Loan steering" -- its legality remains in question -- occurs when people query a developer about home sales, and the developer steers them toward a particular broker or lender. The lender may, after putting the person into a subprime loan, give a kickback to the developer. Another abuse that seems to follow only low-income people is for lenders to steer them into a subprime loan. No law exists to require lenders to tell a borrower that he or she qualifies for a loan at a low fixed rate.
Studies by the National Training and Information Center, a resource for community organizations, finds that lenders who specialize in subprime loans show up more often in ethnic communities, while lenders who offer prime loans are in affluent or white suburbs. In 2002, in Cleveland, Ohio, 37 Citibank branches specialized in subprime loans; only 1 branch wrote prime loans. And yet Fannie Mae -- with Freddie Mac, one of two publicly traded, federally chartered corporations that buys pools of loans -- has found that nearly half of all subprime borrowers would qualify for a prime loan. (Foreclosures for prime loans or Alt-A loans, made to people with slightly blemished credit, are still uncommon; the foreclosure rate on subprime loans is about 20 percent nationwide.)
Moreover, the Federal Reserve Board has shown that African-American and Latino borrowers receive higher-interest loans than their white counterparts. People assume that their neighborhood lender is their only source. Problems arise when people whose income and FICO score qualify them for a prime loan are steered into a subprime loan or when people who can't afford a house are given a loan. A high FICO score helps a borrower get a lower rate on any loan -- house, car, boat, home equity, credit card. (At myfico.com, you can check your credit score against the daily rate for any of these loans.)
Low-income people and recent immigrants are dumped into subprime loans because of their lack of English skills. In general, they don't complain, not because they don't feel cheated but because drawing attention to themselves as recent arrivals can be scary. Ruben Arizmendi, a business litigation lawyer, tells me that in our city's Latino community, loans are sold to Spanish-speaking buyers by Spanish-speaking brokers. But when the loan documents, written in legal jargon, arrive for review and signature, they're in English.
In 2005, Vino Pajanor, a lawyer first licensed to practice in India and a green-card holder, went to buy a home in EastLake. His FICO score of 754 was in the 90th percentile. When he visited the lender, Pajanor asked what kinds of loans were available. Without bothering to ask about his income or his FICO score, the lender offered him an adjustable-rate subprime loan at 8 percent. Pajanor was outraged. He told the lender that his 754 FICO score and his lawyer's salary qualified him for a prime loan at 5.35 percent, not 8. The lender agreed at once. Pajanor says that initially he thought, " 'It's just me. I've only been in the States five years. I didn't have enough credit history.' But then I started thinking, if an educated person like me could have been prey to a subprime loan," then the same thing would certainly happen to those who don't know how to challenge the supposed authority of the lenders.
Working for the law firm Higgs, Fletcher and Mack, Pajanor heard complaints from the Filipino community. Soon, as the vice president of the South Asian Bar Association in San Diego, he began investigating. He learned that certain builders and lenders were "preying on their own kind. It was prevalent in the EastLake area." Filipinos would prey on Filipinos, speaking Tagalog, discussing Filipino culture. He notes that "the psyche of the minority" is easily preyed upon by a person of the same ethnicity. According to Mary Scott Knoll, executive director of the Fair Housing Council of San Diego, ethnic targeting is a "clear violation of the Fair Housing Act." She says criminal charges are hard to prove, but "there are civil remedies" available.
Under the umbrella of the Housing Opportunities Collaborative, Pajanor has held mini-summit meetings with law enforcement agencies, ethnic-based bar associations, and the Department of Housing and Urban Development. The last has collected reports on Hispanic lenders, some of whom may have used gang members to threaten people to sign up with certain Spanish-speaking brokers. San Diego housing advocates are telling people how to spot unscrupulous lenders and staffing monthly home clinics to intervene, especially with those facing foreclosure. One resource for people having difficulty with their mortgages is the hotline 888-995-HOPE.
Eddie Price, head of the San Diego Urban Economic Corporation and a housing advocate, has seen firsthand what's happened in his neighborhood, Valencia Park. He's seen homes idling in foreclosure. The weeds sprout, the paint chips, the windows crack. Foreclosure brings blight. "I don't want to see that when I come home. It's affecting the community. You have these manicured lawns; then you see four-foot-tall grass." What really bothers him, though, is how the subprime crisis is breaking up neighborhoods. A family with four sons was renting a home up the street from Price. Price's son had grown up with their sons. But when the landlord defaulted, the family was evicted. "My son lost four friends. Just like that. That's affected him."
Thomas Larson is the author of The Memoir and the Memoirist: Reading and Writing Personal Narrative.