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Subprime loans plague local Latinos

Posted: November 7, 2009 8:14 p.m.
Updated: November 8, 2009 4:55 a.m.
THE BOTTOM LINE: A city-commissioned report shows Hispanics have received the most subprime loans of any local ethnic group and criticizes Santa Clarita officials for a lack of fair housing outreach. The city says the findings are exaggerated, but it aims to fix the problems.

While all of Santa Clarita has been hurt by the housing market collapse, a city report released last month says its Hispanic residents have received the highest rate of subprime loans and possibly predatory mortgages.

The report also says the city has not done enough to teach all of its residents about a fair housing group it contracts with, which advocates the rights of tenants and investigates claims of predatory loans.

Meanwhile, officials from the Fair Housing Council of the San Fernando Valley — a nonprofit group Santa Clarita pays to investigate unfair housing practices — said the organization does not have the staff or funding from the city it needs to help everyone with bad loans.

City officials said some of the results of the latest report, compiled by a Colorado-based consulting firm, overstated the problems, but added the city will take steps to improve service.

Hispanics hit especially hard
The finding that Latinos were being hit especially hard by subprime lending — and the lack of information being offered to city residents about the issue — was brought to the city’s attention in a 2004 fair housing report.

However, the city’s 2009 Analysis of Impediments to Fair Housing Choice showed the problem not only continued, but grew more severe since the last report — particularly among Hispanics.

Latinos in Santa Clarita have seen a 3 percent increase in subprime loans between 2004 and 2007, while overall subprime loans decreased by 6 percent, the reports said.

Among non-Hispanic loan applicants in Santa Clarita, about 12 percent received subprime loans in 2007.

That same year, 25 percent of the city’s Hispanic loan applicants received subprime loans — the highest percentage of subprime loans for any ethnic group in the city, according to the city’s report.

Overall, most of the subprime loans were given to residents living in Canyon Country and northern Newhall, which the report notes has high concentrations of lower-income housing and higher Hispanic populations.

In some instances, Latinos have been lied to by lenders in Spanish and manipulated into signing bad loan documents in English, said Sharon Kinlaw, the San Fernando Valley Housing Council’s assistant director.

While the report points to many reasons Hispanics and other minorities received subprime loans at higher rates than whites, the report focused on the city’s failure to provide easily accessible information.

“There is currently a lack of information available to city residents about fair housing,” the 2009 report concluded. “The city’s Web site does not currently contain information about housing discrimination, nor does it provide any information about the San Fernando Valley Fair Housing Council.”

City addressing problem
Santa Clarita has already begun working on a five-year plan of action to address the problems presented in the October 2009 report, said Erin Lay, the community development housing program administrator.

One of the first steps will be adding a link to the housing council on the city’s Web site, Lay said.

She said the city is concerned about subprime trends, but that the city’s role is limited to education, not enforcement.

She said the report’s claims that the city doesn’t have information on resources available are overstated.

The city does list the contact information for the housing council on the affordable housing page of its Web site, though it is not prominently displayed.

The council contracts with Santa Clarita to educate and investigate claims of housing discrimination, Kinlaw said.

At least four Santa Clarita residents, including a school teacher who is trying to renegotiate a bad loan, are working with the group, Kinlaw said.

After being contacted by The Signal, Kinlaw added she would begin preparing fliers to mail out to the most affected areas.

Kinlaw said the housing council, which contracts with several other cities, has been bombarded with requests from residents to help them handle bad loans with high interest rates.

Santa Clarita does not pay the council to offer loan education, and the council would be overwhelmed if it formally offered education programs on loans, she said.

“This is a problem. We do a lot of work in the Newhall area; we have to look more closely at these types of loans,” Kinlaw said.
“We’ve seen lots of targeting in lower-income Hispanic communities.”

Kinlaw is encouraging residents who have a problem with a bad loan, or any other housing complaint, to contact the council. Even if the council cannot help, it will refer residents to organizations that can, she said.

Cracking down on lending
In response to the housing crisis, federal laws have been passed to crack down on subprime lending, said Tracy Seslen, assistant professor of finance at the University of Southern California school of business.

Subprime markets have all but washed up because the demand is no longer there for those types of mortgages, she said.

The collapse of the housing market in Los Angeles is tied to subprime lending practices.

It began when housing prices began to fall in 2006, Seslen said. According to the 2009 report, predatory loans tend to be subprime, which include excessive fees and ballooning interest rates and payments.

While the report may show a strong correlation between subprime lending and race, it doesn’t show why Hispanics or other minorities received subprime loans at higher rates than whites, Seslen said. 

Nationally, Hispanics tend to have more difficulty receiving prime loans — some don’t have credit history and rely on multiple borrowers, said Janis Bowdler the Deputy Director of the Wealth-Building Policy Project for the National Council of La Raza.

It was easier, and more profitable, to lenders to give Hispanics subprime loans, Bowdler said. About half of Latinos who qualified for prime loans still were given higher-interest subprime loans, she said.

As a result of the subprime market collapse, La Raza and the Center for Responsible Lending are projecting that about 150,000 homes belonging to Hispanics will foreclose in California by the end of 2009, said Aracely Panameno, director of Latino affairs at the Center of Responsible Lending.

City responsibility limited

The report says many residents don’t know what the council does, and don’t know where to go to register housing complaints and receive information.

Lay said the bulk of education and outreach work is left up to the housing council.

“The city does not have the power to control greed in the banking industry,” she said. “The city’s only responsibility is to provide education.”

Lay said the city will be responsive to the concerns and roll out the solutions over a five-year span.


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