Buyer beware: a new scam targets immigrants with English-only mortgage documents.

WITH THE SUBPRIME MORTGAGE and foreclosure crisis sweeping across the nation, the California State Assembly is considering a bill to protect immigrant first-time home-buyers who are aggressively targeted by unscrupulous mortgage brokers. Assembly Bill 512 would mandate that key portions of loan documents be translated into one of five languages--Chinese, Korean, Tagalog, Spanish or Vietnamese--for people who primarily negotiate their tending contracts in those languages.

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The bill would be a tool to combat a predatory lending scheme that exploits buyers' limited English abilities and knowledge of the U.S. mortgage market. In this bait-and-switch scam, consumers--usually first-generation immigrants who are totally reliant on their brokers--negotiate their mortgage agreements in their native language but are presented with documents in English. In the typical scenario, homebuyers are promised stable terms and affordable refinancing deals, but are sold expensive subprime mortgages instead. Athough California has laws requiring translations of business documents, mortgage brokers are exempt.

Data about the exact numbers of victims is scarce, yet stories of foreclosures abound. "On an anecdotal basis, at least a quarter to a third of the folks who contact our agency are reflective of this situation," explained Heidi Li, the former codirector of Oakland-based Housing and Economic Rights Advocates, Li added that the vast majority of consumers targeted are Latino immigrants.

While the situation is most dire in California, experts say that language-access abuses in the mortgage market have implications for the rest of the country and that other states will be affected. Immigrant and consumer rights advocates say that predatory lending and housing discrimination against immigrants cause a significant portion of the foreclosures. A report released by the National Council of La Raza in 2007 showed that across the country people of color have been disproportionately affected by the subprime crisis, "Forty percent of Latino families and over half of Blacks who receive home loans get higher-cost mortgages, predominately subprime loans," according to the report.

The language-access scam in California has deep connections with the national foreclosure crisis. Forty percent of subprime loans in the U.S. originate in California, and the state recorded 57,875 foreclosures in August 2007, accounting for 24 percent of the nation's foreclosures, the most for any state according to RealtyTrac, a private company that tracks properties in foreclosure. Four of the five California metro areas with the highest foreclosure rates also have the highest concentrations of Latino populations in the state.

The Murillos' story epitomizes the issue. Judy Murillo, along with her husband Juan and sister Martha Jimenez, pooled their resources to buy a $450,000 home in Antioch, California. They negotiated the terms of their loan with their real estate agent in Spanish, but the contract, which specified completely different terms, was entirely in English. Suspecting foul play but not wanting to endanger the deal, the Murillos signed their mortgage. Even with their impeccable credit scores and a sufficient income, their real estate agent sold the family an adjustable rate mortgage, and their $2,800 monthly payments soon rose to $3,500. The family, who is now in danger of defaulting on their loan, is suing their real estate agent and Wells Fargo Bank for fiduciary fraud with the help of Li. The Murillos, saddled with the unexpected financial burden, are struggling to meet the current terms of their loan; Martha Jimenez puts $900 of her $1,600 monthly income towards the mortgage.

AB 512 would require that mortgage brokers provide translated loan summaries with the loan's terms, percentage rates and fees clearly stated. The current wording of AB 512 would allow homebuyers like the Murillos to recover some damages but does not specify how culpable parties would be punished. Consumer and housing rights advocates and industry lobbyists are still discussing the bill's language.