“No Income-No Asset” Mortgage Programs Were Abused By Mortgage Brokers And Mortgage Lenders And Targeted Hispanics Borrowers

5 01 2009

Another problem was so-called NINA — no income, no assets — loans. They were originally intended for self-employed people of means. But Freddie Mac executives worried about abuse, according to documents obtained by Congress…

The program “appears to target borrowers who would have trouble qualifying for a mortgage if their financial position were adequately disclosed,” said a staff memo to Freddie Mac Chairman Richard Syron. “It appears they are disproportionately targeted toward Hispanics.”

 

http://online.wsj.com/article/SB123111072368352309.html?mod=googlenews_wsj

 

 

 

 

Mortgage brokers became a key portion of the lending pipeline. Phi Nguygn, a former broker, worked at two suburban Washington-area firms that employed hundreds of loan originators, most of them Latino. Countrywide and other subprime lenders sent account representatives to brokerage offices frequently, he says. Countrywide didn’t respond to calls requesting comment.

Representatives of subprime lenders passed on “little tricks of the trade” to get borrowers qualified, he says, such as adding a borrower’s name to a relative’s bank account, an illegal maneuver. Mr. Nguygn says he’s now volunteering time to help borrowers facing foreclosure negotiate with banks.

Many loans to Hispanic borrowers were based not on actual income histories but on a borrower’s “stated income.” These so-called no-doc loans yielded higher commissions and involved less paperwork.

Another problem was so-called NINA — no income, no assets — loans. They were originally intended for self-employed people of means. But Freddie Mac executives worried about abuse, according to documents obtained by Congress. The program “appears to target borrowers who would have trouble qualifying for a mortgage if their financial position were adequately disclosed,” said a staff memo to Freddie Mac Chairman Richard Syron. “It appears they are disproportionately targeted toward Hispanics.”

Freddie Mac says it tightened down-payment requirements in 2004 and stopped buying NINA loans altogether in 2007.

“It’s very hard to get in front of a train loaded with highly profitable activities and stop it,” says Ronald Rosenfeld, chairman of the Federal Housing Finance Board, a government agency that regulates home loan banks.

Regions of the country where the housing bubble grew biggest, such as California, Nevada and Florida, are heavily populated by Latinos, many of whom worked in the construction industry during the housing boom. When these markets began to weaken, bad loans depressed the value of neighboring properties, creating a downward spiral. Neighborhoods are now dotted with vacant homes.

By late 2008, one in every nine households in San Joaquin County, Calif., was in default or foreclosure — 24,049 of them, according to Federal Reserve data. Banks have already taken back 55 of every 1,000 homes. In Riverside, Calif., 66,838 houses are owned by banks or were headed in that direction as of October. In Prince William County, Va., a Washington suburb, 11,685 homes, or one in 11, was in default or foreclosure.

Gerardo Cadima, a Bolivian immigrant who works as an electrician, bought a home in suburban Virginia for $330,000, with no money down. “I said this is too good to be true,” he recalls. “I’m 23 years old, with a family, buying my own house.”

When work slowed last year, Mr. Cadima ran into trouble on his adjustable-rate mortgage. “The payments were increasing, and the price of the house was starting to drop,” he says. “I started to think, is this really worth it?” He stopped making payments and his home was sold at auction for $180,000.

In the wake of the housing slump, some participants in the Hispanic lending network are expressing second thoughts about the push. Mr. Sandos, head of Nahrep, says that some of his group’s past members, lured by big commissions, steered borrowers into expensive loans that they couldn’t afford.

Nahrep has filed complaints with state regulators against some of those brokers, he says. Their actions go against Nahrep’s mission of building “sustainable” Latino home ownership.

These days, James Scruggs of Northern Virginia Legal Services is swamped with Latino borrowers facing foreclosure. “We see loan applications that are complete fabrications,” he says. Typically, he says, everything was marketed to borrowers in Spanish, right up until the closing, which was conducted in English.

“We are not talking about people working for the World Bank or the IMF,” he says. “We are talking about day laborers, janitors, people who work in restaurants, people who do babysitting.”

Two such borrowers work in Mr. Scrugg’s office. Sandra Cardoza, a $28,000-a-year office manager, is now $30,000 in arrears on loans totaling $370,000. “Her loan documents say she makes more than me,” says Mr. Scruggs.

Nahrep agents are networking on how to negotiate “short sales” to banks, where Hispanic homeowners sell their homes at a loss in order to escape onerous mortgages. The association has a new how-to guide: “The American Nightmare: Strategies for Preventing, Surviving and Overcoming Foreclosure.”

 
 

 

Advertisements

Actions

Information

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s




%d bloggers like this: