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Federal home ownership policy halves Hispanics’ equity

12:43 AM 07/27/2011
Neil Munro
White House Correspondent

In the ensuing years, the real estate and financial industries used the Clinton and Bush regulations to sell houses and mortgages to many poor Hispanics, including to many new immigrants who eventually would be unable to meet their financial obligations.

A January 2009 Wall Street Journal article quoted Tim Sandos, then at the National Association of Hispanic Real Estate Professionals, saying “We would say, ‘Is he breathing? OK, we’ll give him a mortgage.’”

Many government-backed loans went to Hispanics in California, Nevada, Florida and other southern states. In turn, the loans spurred a massive building boom, further immigration, and yet more construction in Las Vegas, in Californian exurbs and in former deserts.

“Gerardo Cadima, a Bolivian immigrant who works as an electrician, bought a home in suburban Virginia for $330,000, with no money down,” the Wall Street Journal reported. “‘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 [in 2008], 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.”

From 2005 to 2009, the U.S. Hispanic home ownership rate fell from 51 percent to 47 percent; it likely has fallen further because people who bought late in the bubble are more likely to foreclose, said Kochhar. By 2009, the overall Hispanic home ownership rate returned to the level it was in 1999, he added.

The home ownership rate among black households fell only 1 point by 2009, to 46 percent. The ownership rate among white households remained unchanged at 74 percent during during the 2005–2009 downturn, Kochhar said, and has likely remained stable since.

Tags: Hispanics
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  • Alechango

    First, Mr. Sandos of the National Association of Hispanic Real Estate Professionals is misrepresented and his words taken out of context.  He was lamenting the fact that unscrupulous lenders made thousands of poorly underwritten, often fraudulent loans, to thousands of borrowers, including immigrants and Hispanics.  Such lenders often made low or no-income documentation loans in order to derive a greater profit from the making of such loans that were often accompanied by deceitful practices such as teaser rates that mushroomed over time and exorbitant repayment penalties.  The subsequent meltdown in Wall Street did not happen just because these loans were made to “poor” people but rather because deceitful and highly unregulated bad practices were also pervasive in Wall Street, serving only to make matters extremely worse. 

    Many Latino immigrants were the targets of such loans because many had good ‘thin file” credit scores and thus could be combined with the bad loans these lenders were originating in order to make the sale of mortgage-backed securities, of which these loans were a part, attractive since such loans ensured that these securities could be rated triple-A, when in fact, it included loans made toxic by the lenders and had nothing to do with borrowers who often qualified for conventional, safe, affordable loans but were lured into predatory loans.  The mere promotion of homeownership by government or the private sector had nothing to do with the real culprits of the economic mess:  greedy individuals who thought only of their own enrichment at the expense of others and the national economy.

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