March 16, 2007
Take a drive down Pulaski between the Eisenhower Expy. and 63rd
Street on Chicago's
Southwest Side and you'll see about 60 of the most empowering Spanish-language
billboards and advertisements in the city. "Si, se puede" (yes, you
can) own your own home, the private mortgage brokers promise the Latino
population — the fastest growing market of home buyers in the United States
The national home ownership rate among Latinos has grown substantially, from
47.3 percent in 2001 to 49.7 percent last year, according to the U.S. Census.
The rising number of Latinos seeking homes in Chicago
is even more telling. The Woodstock Institute reports that 27,868 home loans
originated from Hispanics in 2004, the last year information is available — up
from 15,893 in 2001.
A slice of the American Dream
Everybody wants their own slice of the American Dream,
whether their family has been in the United States
for generations or for only a few years. But the stories that recent immigrants
in Marquette Park
tell of home purchasing can range from blissful relief to nightmarish regret.
The controversial guidelines of Illinois HB 4050, which are now being redrawn,
targeted ZIP codes that include Marquette Park, where Latinos have been
settling down to raise their families. But during the past few years, the
quality of the mortgages acquired by Hispanic families often depended on
whether they sought counseling or just took the private lenders' encouraging
words at face value.
Consider the contrasting home-buying stories of Nedardo Calderon and his
brother, Jorge, both originally from Guanajuato,
Mexico. Nedardo, 43 years
old, who works in a factory near Marquette
Park to provide for his wife and
five children, successfully purchased a home three years ago with the help of a
caseworker named Maria from Neighborhood Housing Services.
Maria postponed her retirement until their deal closed, and landed them a
30-year, fixed-interest loan on a 4-room house that cost $132,000. After tiring
of paying high rents in California,
their first home in the U.S.,
Nedardo Calderon now pays a manageable $940 a month from a salary of
Jorge, on the other hand, moved into a deal that happened too fast, and he
was taken advantage of by a predatory lender on Pulaski. Jorge is currently a
nervous wreck, trying to refinance his 80/20 adjustable-interest loan through
NHS to avoid foreclosure and save his home. He pays $2,200 a month, even though
he brings home only around $1,900 for his wife and two children.
Jorge, like many who are struggling to pay escalating mortgages, is dealing
with confounding financial pressures. He said he went to the private lender in
the first place because of bad credit stemming from his son's hospital bills
and a failed restaurant venture in Kankakee.
Subprime versus predatory
It's important to understand the difference between a subprime mortgage and
The subprime mortgage market was fueled by the fact that local banks can't
always offer loans to borrowers without credit. That creates a window of
opportunity for private brokers. But as the real estate market heated up, some
brokers operated deceptively, presenting themselves as friends, earning the
trust of the borrowers.
Local community organizations like the Greater Southwest Development
Corporation in Marquette Park
cite as examples of predatory lending practices brokers who were being paid
exorbitant fees by lenders to sign on new home buyers while hiding the true
terms of the mortgage — which often included balloon interest rates.
Greater Southwest said predatory lenders have taken advantage of first-time
buyers and driven up the Chicago
region's foreclosure rate. It's twice the national average after surging by 238
percent between 1995 and 2002, and Illinois
registers fourth nationally in terms of the number of foreclosures and
delinquencies. Of 7,499 foreclosures initiated in the city in 2005, 3,343 were
on the Southwest Side, and 57 percent of all single-family conventional loans
During the recent HB 4050 pilot, when counselors from Neighborhood Housing
Services would guide a first-time home buyer through the process, they often
uncovered alarming discrepancies between the data reported by the mortgage
broker and the documents issued to the borrower. In fact, 60 percent of the
loan files that housing counseling agencies reviewed revealed inaccuracies that
could potentially doom the buyer. That can mean a stated income vastly
different from what the borrower actually makes, or it could mean
adjustable-interest loans that hurt buyers several years after they begin
Jorge's dilemma is one of many horror stories. Mike Reardon of NHS recalled
the case of a factory worker who was bringing home $1,800 a month and was
saddled with a mortgage of $1,500 he acquired through a private lender.
"We tell them 'you have to sell the house,' but the husband said, 'I'll
work harder,'" Reardon said. A bank would have told him he couldn't afford
that loan, but the mortgage broker doesn't care, Reardon added.
Some speculate that during the height of the subprime market, brokers
appealed to undocumented immigrants who wanted to buy homes by insinuating deportation.
They would tell their Latino client base not to go to a bank for a loan because
doing so would expose them to the federal system, and thus deportation.
That's completely false, said Jeff Bartow, executive director of the
Southwest Organizing Project, which teams up with NHS. Undocumented workers who
want to buy a home have to register their individual taxpayer identification
numbers (numbers issued to foreign nationals who don't qualify for Social
Security numbers) with the government, whether they go through a private
mortgage broker or a bank. No matter what, they're in the system.
Dishonest brokers often lived in the community, attended the same churches,
shared the same family, and sometimes originated from the same town in Mexico
or Central America as their borrowers. They speak the
same language, literally. "There is a play off of 'You can trust
me,'" Bartow said. Banks also have tellers who speak Spanish, but they
don't spend the money and reach out to the communities like mortgage brokers
The other tactic, Reardon added, was for the broker to say, " 'Don't
worry about this. You can come back in six months and we'll fix it
again,'" Reardon said. "Of course they'll say that because every time
you refinance a loan, they get another three or four thousand," he said.
One of the aims of unscrupulous brokers is speed. "To get this thing
done fast, and not let the borrower think about what they are getting
into," Reardon said.
Stories like that of Jorge Calderon are what NHS and the Southwest Organizing
Project seek to prevent, especially because a mounting number of foreclosures
can cause a neighborhood to deteriorate over time. Indeed, the Woodstock
Institute estimates 3,750 foreclosures in this neighborhood in 1997 and 1998
have reduced nearby property values by almost $600 million. "Our concern
is that families in these communities are not taken advantage of," Bartow
said, "because it impacts everyone in the neighborhood. Abandoned homes
bleed over into other issues."