As the real estate market has cooled, many people have realized
too late that they are in way over their heads on their home
mortgages.
As the real estate market has cooled, many people have realized too late that they are in way over their heads on their home mortgages.
Back when the market was red hot, it was easy to turn even a lemon of a deal into lemonade. Because prices were rising so fast, a homeowner who found that he couldn’t afford his mortgage payments could turn around and sell his house – and pocket a nice profit – well before foreclosure became a threat.
But that has changed. Here in San Benito County, there were more foreclosures in the first quarter of 2007 than home sale transactions.
Hit hardest of all by this market change were people who bought homes with risky subprime mortgages. While subprime loans make up only 13 percent of the total mortgage market, more than 60 percent of foreclosures this year involve subprime loans.
Minorities – especially non-English speakers – were especially targeted by subprime mortgage brokers. According to the National Fair Housing Alliance, 47 percent of subprime loans were made to Hispanics. A study by the National Council of La Raza found that nearly all mortgage advertisements in Spanish-language newspapers in the United States were for subprime brokers.
So perhaps it’s no surprise that Hollister resident Alberto Ramirez now finds himself worrying about what to do with a house he can’t afford and can’t sell. Ramirez, a strawberry picker who earns $14,000 a year, was able to buy a $720,000 home here with a zero-down subprime mortgage.
Through an interpreter, Ramirez, who does not speak or read English, told the Free Lance that the real estate company and mortgage broker assured him he could indeed afford the monthly payments on the house. He said he believed the people he was dealing with were acting in his best interest. Ramirez soon discovered otherwise and now the home is in foreclosure and his credit is at risk.
People like Ramirez, who work hard and are simply trying to get a piece of the American dream, deserve better than to fall prey to predatory lending schemes.
Our state and federal governments need to do more to protect Ramirez and the many others out there who find themselves in a similar position. We needs laws that clamp down on lenders who would provide home loans to people who clearly are not in a position to make good on a mortgage – and might not even understand the terms of the loan agreement they are signing.
Minimum income requirements should be a given as a qualifier for getting a home loan. And as part of the process, there needs to be built-in protection in the form of an informed advocate acting on behalf of those who can’t read a contract.
Because the economy is tied to the housing industry in so many ways, the effects of the subprime crunch ripple throughout. Such laws would provide a measure of financial protection and stability that would benefit all of us, not just those who get directly caught up in a subprime loan gone bad.
