Life on Mortgage Street: Two brothers face opposing realities
Chicago Sun-Times
Take a drive down Pulaski between the Eisenhower Expy. and 63rd Street on Chicago's Southwest Side and you'll see about 60 of the most empowering Spanish-language billboards and advertisements in the city. "Si, se puede" (yes, you can) own your own home, the private mortgage brokers promise the Latino population -- the fastest growing market of home buyers in the United States today.
The national home ownership rate among Latinos has grown substantially, from 47.3 percent in 2001 to 49.7 percent last year, according to the U.S. Census. The rising number of Latinos seeking homes in Chicago is even more telling. The Woodstock Institute reports that 27,868 home loans originated from Hispanics in 2004, the last year information is available -- up from 15,893 in 2001.
A slice of the American Dream
Everybody wants their own slice of the American Dream, whether their family has been in the United States for generations or for only a few years. But the stories that recent immigrants in Marquette Park tell of home purchasing can range from blissful relief to nightmarish regret. The controversial guidelines of Illinois HB 4050, which are now being redrawn, targeted ZIP codes that include Marquette Park, where Latinos have been settling down to raise their families. But during the past few years, the quality of the mortgages acquired by Hispanic families often depended on whether they sought counseling or just took the private lenders' encouraging words at face value.
Consider the contrasting home-buying stories of Nedardo Calderon and his brother, Jorge, both originally from Guanajuato, Mexico. Nedardo, 43 years old, who works in a factory near Marquette Park to provide for his wife and five children, successfully purchased a home three years ago with the help of a caseworker named Maria from Neighborhood Housing Services.
Maria postponed her retirement until their deal closed, and landed them a 30-year, fixed-interest loan on a 4-room house that cost $132,000. After tiring of paying high rents in California, their first home in the U.S., Nedardo Calderon now pays a manageable $940 a month from a salary of approximately $2,000.
Jorge, on the other hand, moved into a deal that happened too fast, and he was taken advantage of by a predatory lender on Pulaski. Jorge is currently a nervous wreck, trying to refinance his 80/20 adjustable-interest loan through NHS to avoid foreclosure and save his home. He pays $2,200 a month, even though he brings home only around $1,900 for his wife and two children.
Jorge, like many who are struggling to pay escalating mortgages, is dealing with confounding financial pressures. He said he went to the private lender in the first place because of bad credit stemming from his son's hospital bills and a failed restaurant venture in Kankakee.
Subprime versus predatory
It's important to understand the difference between a subprime mortgage and predatory lending.
The subprime mortgage market was fueled by the fact that local banks can't always offer loans to borrowers without credit. That creates a window of opportunity for private brokers. But as the real estate market heated up, some brokers operated deceptively, presenting themselves as friends, earning the trust of the borrowers.
Local community organizations like the Greater Southwest Development Corporation in Marquette Park cite as examples of predatory lending practices brokers who were being paid exorbitant fees by lenders to sign on new home buyers while hiding the true terms of the mortgage -- which often included balloon interest rates.
Greater Southwest said predatory lenders have taken advantage of first-time buyers and driven up the Chicago region's foreclosure rate. It's twice the national average after surging by 238 percent between 1995 and 2002, and Illinois registers fourth nationally in terms of the number of foreclosures and delinquencies. Of 7,499 foreclosures initiated in the city in 2005, 3,343 were on the Southwest Side, and 57 percent of all single-family conventional loans were high-cost.
During the recent HB 4050 pilot, when counselors from Neighborhood Housing Services would guide a first-time home buyer through the process, they often uncovered alarming discrepancies between the data reported by the mortgage broker and the documents issued to the borrower. In fact, 60 percent of the loan files that housing counseling agencies reviewed revealed inaccuracies that could potentially doom the buyer. That can mean a stated income vastly different from what the borrower actually makes, or it could mean adjustable-interest loans that hurt buyers several years after they begin making payments.
Jorge's dilemma is one of many horror stories. Mike Reardon of NHS recalled the case of a factory worker who was bringing home $1,800 a month and was saddled with a mortgage of $1,500 he acquired through a private lender. "We tell them 'you have to sell the house,' but the husband said, 'I'll work harder,'" Reardon said. A bank would have told him he couldn't afford that loan, but the mortgage broker doesn't care, Reardon added.
Some speculate that during the height of the subprime market, brokers appealed to undocumented immigrants who wanted to buy homes by insinuating deportation. They would tell their Latino client base not to go to a bank for a loan because doing so would expose them to the federal system, and thus deportation.
That's completely false, said Jeff Bartow, executive director of the Southwest Organizing Project, which teams up with NHS. Undocumented workers who want to buy a home have to register their individual taxpayer identification numbers (numbers issued to foreign nationals who don't qualify for Social Security numbers) with the government, whether they go through a private mortgage broker or a bank. No matter what, they're in the system.
Dishonest brokers often lived in the community, attended the same churches, shared the same family, and sometimes originated from the same town in Mexico or Central America as their borrowers. They speak the same language, literally. "There is a play off of 'You can trust me,'" Bartow said. Banks also have tellers who speak Spanish, but they don't spend the money and reach out to the communities like mortgage brokers do.
The other tactic, Reardon added, was for the broker to say, " 'Don't worry about this. You can come back in six months and we'll fix it again,'" Reardon said. "Of course they'll say that because every time you refinance a loan, they get another three or four thousand," he said.
One of the aims of unscrupulous brokers is speed. "To get this thing done fast, and not let the borrower think about what they are getting into," Reardon said.
Stories like that of Jorge Calderon are what NHS and the Southwest Organizing Project seek to prevent, especially because a mounting number of foreclosures can cause a neighborhood to deteriorate over time. Indeed, the Woodstock Institute estimates 3,750 foreclosures in this neighborhood in 1997 and 1998 have reduced nearby property values by almost $600 million. "Our concern is that families in these communities are not taken advantage of," Bartow said, "because it impacts everyone in the neighborhood. Abandoned homes bleed over into other issues."
Take a drive down Pulaski between the Eisenhower Expy. and 63rd Street on Chicago's Southwest Side and you'll see about 60 of the most empowering Spanish-language billboards and advertisements in the city. "Si, se puede" (yes, you can) own your own home, the private mortgage brokers promise the Latino population -- the fastest growing market of home buyers in the United States today.
The national home ownership rate among Latinos has grown substantially, from 47.3 percent in 2001 to 49.7 percent last year, according to the U.S. Census. The rising number of Latinos seeking homes in Chicago is even more telling. The Woodstock Institute reports that 27,868 home loans originated from Hispanics in 2004, the last year information is available -- up from 15,893 in 2001.
A slice of the American Dream
Everybody wants their own slice of the American Dream, whether their family has been in the United States for generations or for only a few years. But the stories that recent immigrants in Marquette Park tell of home purchasing can range from blissful relief to nightmarish regret. The controversial guidelines of Illinois HB 4050, which are now being redrawn, targeted ZIP codes that include Marquette Park, where Latinos have been settling down to raise their families. But during the past few years, the quality of the mortgages acquired by Hispanic families often depended on whether they sought counseling or just took the private lenders' encouraging words at face value.
Consider the contrasting home-buying stories of Nedardo Calderon and his brother, Jorge, both originally from Guanajuato, Mexico. Nedardo, 43 years old, who works in a factory near Marquette Park to provide for his wife and five children, successfully purchased a home three years ago with the help of a caseworker named Maria from Neighborhood Housing Services.
Maria postponed her retirement until their deal closed, and landed them a 30-year, fixed-interest loan on a 4-room house that cost $132,000. After tiring of paying high rents in California, their first home in the U.S., Nedardo Calderon now pays a manageable $940 a month from a salary of approximately $2,000.
Jorge, on the other hand, moved into a deal that happened too fast, and he was taken advantage of by a predatory lender on Pulaski. Jorge is currently a nervous wreck, trying to refinance his 80/20 adjustable-interest loan through NHS to avoid foreclosure and save his home. He pays $2,200 a month, even though he brings home only around $1,900 for his wife and two children.
Jorge, like many who are struggling to pay escalating mortgages, is dealing with confounding financial pressures. He said he went to the private lender in the first place because of bad credit stemming from his son's hospital bills and a failed restaurant venture in Kankakee.
Subprime versus predatory
It's important to understand the difference between a subprime mortgage and predatory lending.
The subprime mortgage market was fueled by the fact that local banks can't always offer loans to borrowers without credit. That creates a window of opportunity for private brokers. But as the real estate market heated up, some brokers operated deceptively, presenting themselves as friends, earning the trust of the borrowers.
Local community organizations like the Greater Southwest Development Corporation in Marquette Park cite as examples of predatory lending practices brokers who were being paid exorbitant fees by lenders to sign on new home buyers while hiding the true terms of the mortgage -- which often included balloon interest rates.
Greater Southwest said predatory lenders have taken advantage of first-time buyers and driven up the Chicago region's foreclosure rate. It's twice the national average after surging by 238 percent between 1995 and 2002, and Illinois registers fourth nationally in terms of the number of foreclosures and delinquencies. Of 7,499 foreclosures initiated in the city in 2005, 3,343 were on the Southwest Side, and 57 percent of all single-family conventional loans were high-cost.
During the recent HB 4050 pilot, when counselors from Neighborhood Housing Services would guide a first-time home buyer through the process, they often uncovered alarming discrepancies between the data reported by the mortgage broker and the documents issued to the borrower. In fact, 60 percent of the loan files that housing counseling agencies reviewed revealed inaccuracies that could potentially doom the buyer. That can mean a stated income vastly different from what the borrower actually makes, or it could mean adjustable-interest loans that hurt buyers several years after they begin making payments.
Jorge's dilemma is one of many horror stories. Mike Reardon of NHS recalled the case of a factory worker who was bringing home $1,800 a month and was saddled with a mortgage of $1,500 he acquired through a private lender. "We tell them 'you have to sell the house,' but the husband said, 'I'll work harder,'" Reardon said. A bank would have told him he couldn't afford that loan, but the mortgage broker doesn't care, Reardon added.
Some speculate that during the height of the subprime market, brokers appealed to undocumented immigrants who wanted to buy homes by insinuating deportation. They would tell their Latino client base not to go to a bank for a loan because doing so would expose them to the federal system, and thus deportation.
That's completely false, said Jeff Bartow, executive director of the Southwest Organizing Project, which teams up with NHS. Undocumented workers who want to buy a home have to register their individual taxpayer identification numbers (numbers issued to foreign nationals who don't qualify for Social Security numbers) with the government, whether they go through a private mortgage broker or a bank. No matter what, they're in the system.
Dishonest brokers often lived in the community, attended the same churches, shared the same family, and sometimes originated from the same town in Mexico or Central America as their borrowers. They speak the same language, literally. "There is a play off of 'You can trust me,'" Bartow said. Banks also have tellers who speak Spanish, but they don't spend the money and reach out to the communities like mortgage brokers do.
The other tactic, Reardon added, was for the broker to say, " 'Don't worry about this. You can come back in six months and we'll fix it again,'" Reardon said. "Of course they'll say that because every time you refinance a loan, they get another three or four thousand," he said.
One of the aims of unscrupulous brokers is speed. "To get this thing done fast, and not let the borrower think about what they are getting into," Reardon said.
Stories like that of Jorge Calderon are what NHS and the Southwest Organizing Project seek to prevent, especially because a mounting number of foreclosures can cause a neighborhood to deteriorate over time. Indeed, the Woodstock Institute estimates 3,750 foreclosures in this neighborhood in 1997 and 1998 have reduced nearby property values by almost $600 million. "Our concern is that families in these communities are not taken advantage of," Bartow said, "because it impacts everyone in the neighborhood. Abandoned homes bleed over into other issues."
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