By Kirstin Downey
Washington Post Staff Writer
Monday, March 26, 2007
Immigrants are emerging as among the first victims of a growing wave of home foreclosures in the Washington area as mortgage lending problems multiply locally and across the country.
Nationally, 375,000 high-interest-rate loans were made to Hispanics in 2005, and nearly 73,000 of them are likely to go into foreclosure, said Aracely Panameño, director of Latino affairs for the Center for Responsible Lending. About 1.1 million homes in the United States are expected to go into foreclosure in the next six years, and many native-born Americans are likely to be stuck with burdensome loans. But immigrants are getting hit first in part because their incomes tend to be lower and many have lost construction jobs.
Homeownership rates among immigrants surged in the first half of the decade, making their prosperity an economic success story. Now it is becoming apparent that many people managed to buy homes in an inflated real estate market by turning to unusual new mortgages only now receiving scrutiny from regulators and legislators. Many of these loans start with attractive low "teaser" rates but feature payments that can suddenly increase.
Unfamiliar with the U.S. mortgage market, unable to speak or read English well and vulnerable to the blandishments of real estate professionals who told them property values always rise, many immigrants are struggling to deal with high mortgage payments as their homes sag in value, making it harder to escape the loans by selling.
Tysons Corner mortgage broker Jose Luis Semidey, who has a popular Spanish-language real estate talk show on Radio Universal, is being deluged with calls from desperate homeowners who are falling behind on their mortgages. The calls started in late 2005 and have steadily risen; he now receives 40 to 50 calls a day from throughout the area.
"I see more coming," Semidey said.
Panameño agreed. "I'm being flooded by phone calls from throughout the country from people begging for help," he said. "The best I can do is refer people to attorneys to get assistance."
Nahid Azimi, who immigrated to the United States from Afghanistan 22 years ago, recently stood in the upstairs hallway of her home in Loudoun County, silently sobbing as she removed the last of her personal items from the $410,000 townhouse in South Riding she bought with pride last summer. She said she was persuaded to buy the house by an Afghan real estate agent she considered a friend and by an Afghan mortgage broker who promised to get her a good loan.
Instead, Azimi, a cashier at Giant who makes $2,400 a month, found herself strapped into a no-down-payment loan with payments of $3,800 a month. She knew it would be impossible to make the payments, but the mortgage broker promised to refinance her loan to make it more affordable. Azimi couldn't qualify for the refinance, however, so she got a second job to try to cover the costs, borrowed money from her friends and tried unsuccessfully to sell the house. Then one day in November, she collapsed at work, in part because of the stress.
Today, she will call the loan servicing company and offer to give back the keys.
"I can't do it anymore," said Azimi, 44, a U.S. citizen. "I cannot afford it, and I don't want them to come one day and put my stuff on the street."
Some lenders allowed people to take out loans without verifying their income or their ability to repay. Traditionally, lenders have made loans only to people they thought could pay them back. Banking regulations forced lenders to adhere to strict lending policies, not just for the protection of borrowers but also to protect bank depositors, who would be hurt if the banks collapsed. But in recent years, lenders have found alternative sources of financing for the loans by turning to investors who bought the loans as packaged securities. These kinds of loans are not supervised in the same ways as loans made by banks and held in their portfolios.
Laissez-faire regulatory policies made other government agencies reluctant to intervene.
"The market changed so investors were setting the standards for qualifying people for mortgage lending," said Allen Fishbein, director of housing and credit policy at the Consumer Federation of America. "They had a higher appetite for risk, which led to the lax standards that are resulting in delinquencies. The regulators should have been more concerned about protecting consumers than about protecting financial institutions."
Officials at the Mortgage Bankers Association were unavailable for comment. In previous interviews, they have said that loosened credit policies allowed more families to become homeowners and that reputable lenders do not make loans that cannot be repaid.
Many immigrants initially welcomed the lending changes as the only way they could afford to buy.
Places where immigrants cluster have been particularly hard-hit. Semidey said that the most calls are coming from Manassas, Woodbridge and Dale City in Virginia and Gaithersburg, Germantown, Capitol Heights and Langley Park in Maryland. But one recent caller was the owner of a $1.5 million home in McLean, a restaurateur who has seen her business slide in recent months as the slowdown in the construction industry pinches the pocketbooks of her Latino patrons. Another was an illiterate carpenter who bought a $750,000 house in Ashburn Village, Semidey said.
Francisco Santos, 31, who lays tile, makes $60,000 a year by working seven days a week. He became convinced that real estate was a can't-lose proposition after the value of the townhouse he had bought in Woodbridge in 2002 for $95,000 climbed to $230,000. He and his wife, Linda, a homemaker, traded up to another house and banked part of their profits. The Spanish-speaking real estate agents with whom he negotiated the purchase persuaded him to borrow against his equity to move up again.
"They called me every day; they said we can do more business, that it's a good time to do it," he said in a mixture of English and Spanish. "They talked very sweet into my ear. I believed. I believed these people, and I did this business."
So Francisco and Linda went to visit a spacious red-brick house on Lord Culpeper Drive in Woodbridge, with its master bedroom suite and well-equipped kitchen, priced at $540,000. Linda nearly swooned with pleasure as she looked around the interior. She thought: Here was her dream house.
They decided to buy the house, which was fairly easy because the Santoses had excellent credit, equity in the other house and money in the bank. The mortgage broker made things even easier by doing the settlement in their home, something many Hispanic families find more comfortable. That also made Francisco's life easier because he typically works until 8 at night, making it hard to get places during normal business hours.
He tried to rent out their former house, but the tenants didn't pay their rent, so the Santoses used up their savings to keep up payments on the two houses. They put the houses on the market but found no buyers. When they couldn't make payments, their credit rating deteriorated.
The stress on the family mounted as collection agencies began calling, over and over. With two small children and another one on the way, the pressures grew. The couple quarreled, and Francisco Santos said he sometimes yelled at the kids for little provocation.
"I feel terrible," said Santos, a legal immigrant. "I'm trying to keep control because my wife is pregnant, and I don't want her to feel bad. It's difficult. I was thinking about my kids, and their opportunity to have a good life. My wife, she says, 'Why? Why?' "
The loan servicing company, American Home Services, will foreclose on the new house Saturday. The Santoses will move back to their old house and hope that they will be able to leave the problems of the new house behind them.