By Brigid Schulte
Washington Post Staff Writer
Saturday, March 22, 2008
Looking back, Glenda Ortiz can see she did everything wrong when she bought her house in 2005. In fact, to understand the housing crisis that has swept the country, one need only listen to the tale of the Ortiz family.
She looked at only one house and paid too much for it: $430,000 for a run-down, one-story duplex in Alexandria, triple what the house had sold for the year before, and $5,000 more than the asking price, according to real estate records.
She agreed to a high-interest loan that would cost her more than $3,000 a month, more than 70 percent of the $4,200 that she and her husband brought home monthly.
She signed papers in English that she didn't understand. One said she was married to a man she didn't know.
She placed her financial future in the hands of a woman she barely knew who sold cosmetics and jewelry door to door. She sought no one else's advice.
Her loan application sailed through an originator and was accepted by a mortgage company, both specializing in customers with "less than ideal" credit.
And so, in August 2005, Glenda Ortiz, a cook at a Best Western who lived in a cramped apartment in Arlington County, became a homeowner. By last March, the home was in foreclosure. The loan originator and mortgage company had gone out of business. And Ortiz was headed to court.
"It was all a mistake. One hundred percent," Ortiz said recently in Spanish. "I had such a burning desire to have my own house. I didn't think about anything else."
Ortiz and her husband, an air conditioner installer, are examples of what can happen when a hot real estate market collides with cheap credit, lax lending standards and little oversight. No one is free from blame in this tale.
Theirs is a story that Erick Gutierrez, housing director for the Washington-based Latino Economic Development Corp., said is all too familiar. Gutierrez blames the government for allowing so many subprime loans, such as Ortiz's, which required no proof of income. "You could say: 'You clean houses on weekends? Great!' And then put down that they made $1,000 a week," he said.
But by then, real estate agents would have made their commissions, mortgage brokers would have their closing costs, and the risky loans would have been repackaged and sold to Wall Street. No one cared as long as the housing market continued to boom.
According to the Center for Responsible Lending, 40 percent of loans to Latinos are subprime, and it projects that one out of five of these loans made in 2005 and 2006 will go into foreclosure.
"This is emblematic of people preying on their own and emblematic of bad brokers, but also emblematic of legitimate financial institutions either helping this happen or ignoring some facts so they can make a lot of money," said Alys Cohen, an attorney with the National Consumer Law Center. "The problem is the system and that no one cares until Wall Street stops making money. And that's what's happening now."
* * *
Glenda Ortiz, 40, had been struggling for nine years, since the day she fled Hurricane Mitch in Honduras and arrived in the United States to find her "own little piece of soil." She dreamed that owning a home would bring her scattered family together. She fantasized about being able to bring home the daughter she'd left behind as an infant. "I know her only from photographs," she said wistfully. "I wanted a future for my family, for my children."
Ortiz, who speaks little English, said she didn't know much about the U.S. banking system. So when a Mary Kay saleswoman, Maria Esperanza Salgado, came to her door and said she could help her buy a house, Ortiz said, she believed her.
Salgado had a business card with a blue Realtor logo identifying herself as a "sales assistant" to real estate agent Jorge Aguilar. Salgado is not licensed with the Virginia Real Estate Board. Aguilar said Salgado "was a very good sales promoter." He said he paid her $500 for every referral she brought him, although board regulations prohibit paying commissions or referral fees to anyone but a licensed real estate agent. Salgado said he gave her only "gifts." Aguilar said Salgado no longer works for him.
When Ortiz protested that she and her husband didn't have good credit and had only a few thousand dollars in savings, Ortiz said Salgado, whom she had known for less than a year, promised to help her.
Ortiz said she and Salgado came up with a plan. They would buy the house jointly, using Salgado's credit rating. Salgado also would pay half of the $11,000 down payment. The agreement is spelled out in court papers Ortiz has filed.
In a year, when the house had increased in value, as they assumed it would in the hot market, Ortiz would refinance. Ortiz said they had planned to take out $70,000 in equity, half of which she would pay Salgado for her share of the down payment and for allowing Ortiz to use her credit. Salgado would remove her name from the title, and Ortiz would own the house outright, according to the court documents.
But on the day of the closing in August 2005, Salgado's brother Saul Salgado Hernandez showed up to sign the papers. Ortiz said that she was surprised but that she figured Salgado knew what she was doing. She said she did not understand any of the papers in the thick stack of documents that she signed, not even the one that said she and Hernandez were married. "I signed the papers," she said. "I didn't notice." She also discovered that the woman handling her mortgage was Aguilar's wife.
Maria Salgado said she agreed to lend Ortiz the down payment money and use her brother's credit to buy the house because Ortiz was her "best friend."
"She wanted to buy a house. I wanted to help her," Salgado said. Her own credit was not good enough to help Ortiz, but that of her brother, a construction worker, was, she said.
"I asked my brother to help my best friend," Salgado said. She confirmed that she and Ortiz had planned to remove Hernandez's name from the title after one year. But Salgado said she did not agree to refinance.
Joe DiSalvo, a mortgage broker with Continental Mortgage and Investment Corp. in Arlington, reviewed Ortiz's housing documents at the request of The Washington Post and found them loaded with junk fees and an overpriced appraisal. The "excessive" closing costs, he said, were upward of $10,000.
Blissfully unaware, Ortiz hung filmy white and maroon curtains in her home on East Reed Avenue. She put photographs of her family and the Sacred Heart of Jesus on the living room walls. She paid the mortgage every month, sometimes selling jewelry, forgoing other bills or taking out loans to do so. But she owned a home. She was happy.
So much so that she encouraged her niece Karla Ortiz to talk to Salgado. In September 2006, Karla, a Honduran immigrant who cleans houses for a living, was able to buy a half-million-dollar house in Springfield, and she paid $10,000 more than the asking price. Because her credit was poor, she used a friend's name and credit report on the mortgage application. No one blinked an eye.
Karla Ortiz, 30, said she worried that the house cost more than she could afford. Salgado maintains that she never showed houses to Karla Ortiz or anyone else.
Ortiz borrowed $8,000 for a down payment from an acquaintance at 20 percent interest.
She made three $5,000 monthly mortgage payments before the home on Middlesex Avenue went into foreclosure and her friend signed the house over to their mortgage broker.
* * *
The end of Glenda Ortiz's dream came swiftly. By February 2007, she and her husband couldn't pay the bills. Their power was about to be shut off because they owed Dominion Virginia Power $1,185. The city of Alexandria sent letters demanding the $7,215.88 they owed in property taxes.
She fell behind on the mortgage.
The refinance scheme she had worked out with Salgado fell through. The house had not appreciated as expected, and the bank would not help her with a payment plan. Although her name was listed on the deed, she was not listed as a borrower on the loan, records show. Ortiz said bank officials told her that they didn't have the authority to negotiate with her. When she called Hernandez for help, she said, he told her to leave the home.
With the home in foreclosure, Hernandez's attorney sent Ortiz a letter threatening legal action unless she turned it over to him as a gift. "You have caused Saul much damage by ignoring your duties and by taking advantage of his good faith," the letter read in Spanish. Maria Salgado said she borrowed $21,000 from a friend to bring the mortgage payments up to date because she didn't want to ruin her brother's credit. "It was all my fault," she said. "Saul didn't know Glenda."
Ortiz sought out lawyer Howard Woodson for help. In October, he urged her to sign an agreement to gift the house to Hernandez. Although she refused and asked for a hearing, a Circuit Court judge ordered Ortiz to gift the home to Hernandez. It includes a clause prohibiting Ortiz from suing Salgado and Hernandez for fraud, according to court records.
"My house. My dream. It was all an illusion," Ortiz said. She has scraped the money together to hire a new lawyer and has filed an appeal.
Hernandez, who sold the home in December for $380,000, according to Alexandria property records, did not return several phone calls seeking comment. His attorney, Don Haddock, said the judge's order corrected the "erroneous" housing document to clarify that Hernandez and Ortiz are not married.
"Is [what they did] illegal? I don't think it's illegal," Woodson said. "But you've knowingly induced people to enter a bad agreement."
Aguilar said he saw nothing amiss in the transaction. Ortiz wanted a house, and Hernandez wanted an investment.
"Everybody was fine. Everybody was happy. But now that the market's gone down, everybody's got a problem and wants to blame it on the realtor, saying we guided them to bad loans," he said. "Everybody's blaming everybody else. But everyone contributed to the housing bubble, the banks, the real estate agents, the appraisers. Everyone's to blame."
* * *
Glenda Ortiz is again living in an apartment off Glebe Road in Arlandria. She said she had become so depressed about losing her home that she stopped working for more than a year.
The family photos are back on the walls, as is the Sacred Heart of Jesus. Michael the Archangel sits atop the bookcase, little glasses of beer set in front of him, "because he likes it." The TV blares Spanish soap operas. It is not perfect here. It is not hers. But she's tired. And it will do. "You think you're doing something right, and it turns out all wrong," she said.
She no longer dreams of owning a home in America.