by Janet Murguía
Stories about families who face foreclosure on their homes because they trusted lenders have become part of the daily news cycle. Unscrupulous lenders offered easy and fast approvals, only to leave ill-informed borrowers with risky, expensive, and in some cases, deceptive financing.
In recent days, U.S. Treasury Secretary Henry Paulson Jr. has pointed to bad lending practices as the reason for the current downturn in the mortgage market.
We could not agree more. The current crisis is further evidence of the flaws in the mortgage system – which the National Council of La Raza and many others have long warned about – and it leaves Latino and other borrowers vulnerable to unethical lending practices.
A house is the primary asset for most families. For low-income families, a home represents the single greatest opportunity to build wealth. Congress and the mortgage industry must act now to protect the gains toward achieving the American Dream of homeownership and to prevent that dream from turning into a nightmare for millions.
Predatory lending is threatening the significant gains in homeownership Hispanics have made in the last decade. Too many low-income families in the Latino community have been shuffled into expensive loans by lenders, even when they had good credit. Foreclosure rates are at an all-time high and they are likely to keep climbing.
But there is a ray of hope. We are encouraged by findings of a report produced by NCLR and the National Association of Hispanic Real Estate Professionals (NAHREP), which highlight the best practices of the mortgage brokers who are doing a good job in serving our community.
Many brokers interviewed for the report expressed frustration that others in their industry have taken advantage of families’ trust by steering them to high-cost loans that are profitable for the broker but risky for the borrower. As one respondent put it, “Eight out of ten of these families (in foreclosure) never should have gotten the loan.”
These real estate professionals realize that the mortgage industry needs reform to promote responsible lending and protect vulnerable borrowers.
The report, Saving Homes, Saving Communities: Latino Brokers Speak Out on Hispanic Homeownership, is an indication that we can do better. Some industry leaders have announced plans to support foreclosure prevention counseling. Others are taking steps to modify unaffordable loan terms for borrowers in trouble. But this is far from an industry-wide trend. We need to do more.
We need a national campaign against foreclosure that compels all stakeholders to contribute to the solution.
Wall Street must agree to new principles under which they will consider modifying the terms of loans that were never going to be affordable in the first place. Lenders must give priority to developing affordable loans that meet the credit needs of underserved borrowers. And, the Latino community must urge Congress to pass anti-predatory lending legislation to end the untenable practices that are at the heart of the alarming rise in foreclosure rates.
The nonprofit housing counseling industry must also gear up to meet the demands of families who are facing a financial crisis. These providers know how to get safe and fair mortgages for working families and to educate them on how to be responsible borrowers.
(Janet Murgúia, president of the National Council of La Raza, the nation’s largest Hispanic advocacy and civil rights organization, writes a monthly commentary for Hispanic Link News Service. Readers may respond to her at firstname.lastname@example.org or contact one of the mentioned groups by visiting www.nclr.org/homeownership). ©2007