Unscrupulous mortgage brokers use language deficiencies to
confuse their prey into signing illegal contracts
”
Maria
”
and her husband, residents of San Juan Bautista, worked hard,
saved and were finally able to purchase their own home.
Four years passed when one day they received a phone call. It
was from a mortgage broker.
Unscrupulous mortgage brokers use language deficiencies to confuse their prey into signing illegal contracts
“Maria” and her husband, residents of San Juan Bautista, worked hard, saved and were finally able to purchase their own home.
Four years passed when one day they received a phone call. It was from a mortgage broker.
“What if I told you your home was worth $550,000. That’s your money, but do you know who has it? The bank,” the suave Latin voice told Maria – not her real name – in Spanish. “Let us help you get it back,” he said reassuringly.
Maria was convinced by the faceless voice to refinance her home. She was told that she would receive $40,000 for doing very little.
Maria is not a woman of excessive means. She is currently without an income and could definitely use the money, but she is also not educated and doesn’t speak English.
When two men showed up and had her sign a power of attorney, she wasn’t suspicious. The men that showed up at her house said that they would give her the loan and that the payments she was making on the house would remain the same, $2,800 per month. It sounded like a dream. The men told her that they’ll even fill out the paperwork for her, since it’s in English and she doesn’t read or write in English, all she has to do is sign.
One month went by and the men came to give Maria the $40,000. She continues to make the payments like she was making previously, but after six months the $2,800 monthly payments she had been making suddenly jump to $6,000. She is confused. She cannot afford $6,000, but she starts trying to catch up with what she owes. She sends in part of the money and the full amount the next month, but she’s told that it still isn’t enough.
The nice Latino men she dealt with have locked her into a “hard money” loan, so if she owed $6,000 on a $40,000 loan this month, next month she’ll owe $12,000 on $80,000. With this type of loan, not only does the interest increase when a payment is missed, but the principal also increases.
This type of activity is a scam; it’s called predatory lending and is unethical and some of the activities are illegal. The people who are participating in it are scam artists and there are no protections in place to help people if they don’t know English.
Maria had to go back to picking lettuce and even then the bank foreclosed on her house. Her American dream was shattered and her credit was left in ruins.
The California Department of Real Estate (DRE), the agency that is supposed to police brokers and protects the public in real estate transactions is not geared to handle predatory lending. In 1998 the DRE was inundated with complaints, but there was no process for handling complaints.
Today the agency takes complaints, but only in English, so if you don’t read or write English you can’t do anything.
The National Association of Hispanic Real Estate Professionals (NAHRE) estimates that Hispanics in the United States generate $40 billion per year in income that they can use to purchase homes. They often turn to fellow Hispanics when they want to purchase a home.
The problem is that these are the same people that are targeting uneducated, non-English speaking Hispanics to victimize in predatory lending, according to Emilio Martinez, a real estate investigator from the Watsonville area.
“If you’re Latino and you’re being subjected to fraud, chances are it’s being committed by Latinos,” Martinez said.
Estimates are all over the place for how often these types of crimes occur, since many of the victims are too embarrassed to come forward, or don’t speak enough English to complain, but the reality is that these people are being victimized every day.
Martinez started as an insurance adjuster/investigator 12 years ago, but began investigating real estate fraud six months ago and suddenly found himself bombarded with cases.
“I set up an office next door to a real estate broker and he said ‘hey, do you want to look into this case for this guy’ and I started finding all these interesting things. Brokers assume I don’t know the laws, but my wife is an attorney and she specializes in real estate law. Very few attorneys know how to rescind a loan and even fewer have ever done it before,” Martinez said.
Now he works at getting money back from some of the lending agencies that have willfully defrauded ignorant people.
The worst part is that in every situation the businesses can continue predatory lending because nobody files depositions. The brokerages are anxious to settle out of court, and when they do, they have Martinez or whoever is handling the situation, sign a confidentiality agreement, in effect ensuring that they can continue their unethical practices.
“More often than not the client just wants whatever money they can get then they’ll go back to Mexico and try to forget they got taken advantage of,” Martinez said.
He said that often district attorneys are not willing to prosecute predatory lending cases, due to the amount of money it absorbs. San Benito County District Attorney John Sarsfield said that the county hasn’t had any cases reported, but if they had a case he would certainly prosecute because the crime falls under consumer protection.
However, Sarsfield acknowledged that he has heard of cases of predatory lending in the county.
The local branch of the League of United Latin American Citizens President Mickie Luna said that the organization hears complaints from people who have been taken advantage of all the time.
“We’ve been getting a lot of calls in regards to brokers,” Luna said. “Many people have been given some really bad deals and it’s a serious situation because they’re losing their homes.”
She went on to explain that the organization has made inquiries with its state representative, but has not talked to the district attorney’s office because it wanted to meet with its representative first. LULAC held a public forum to discuss the issue a few months ago.
There was a silver lining to Maria’s gray cloud in that she was able to recover $60,000 from the people who scammed her, but her credit was ruined. Today she is back in Mexico with her dreams of America shattered forever.
