LATINOS FALLING VICTIM TO PREDATORY LENDERS.

Byline: Rachel Uranga Staff Writer

When Honorato Esquivel signed off on a $15,000 loan secured by his Shadow Hills home, he thought he had said goodbye to his worrisome stack of short-term debt.

But Esquivel doesn't speak English and he never had the fine print translated. Not until he received a foreclosure notice a few months later did he learn the terms: A three-month loan with an annual interest rate of 108 percent.

``I didn't know what interest was,'' said Esquivel, a 58-year-old father of five who purchased his three-bedroom home six years ago on a handyman's salary. ``My friend recommended (the lender).''

Fortunately, Esquivel hired an attorney and was able to stop the foreclosure. He is now in legal proceedings against the lender, which the California Department of Corporations shut down last year.

But his case is hardly isolated.

According to a study released Wednesday by the National Council of La Raza, Latinos are much more likely than whites to be steered into sub-prime loans by unscrupulous mortgage brokers and lenders.

The study by La Raza, one of the nation's largest Latino advocacy groups, found sub-prime lenders, which charge higher interest rates for less credit-worthy customers, grab the largest part of the Latino market. In many cases, Latino home buyers qualify for prime rate loans, but they are preyed upon by shifty lenders who target them with Spanish-speaking advertisements.

The high interest rates can push borrowers into more vulnerable financial positions and can lead to foreclosures, as in Esquivel's case.

``Not enough Latinos are being served by the mainstream mortgage industry,'' said report author Janis Bowdler, pointing out that one in five Latinos don't use traditional mortgage lenders such as Wells Fargo or Countrywide. ``This is the face of our home-buying market and we have to find better ways to serve them.''

Even if the interest rates are only 3 percentage points or 4 percentage points above prime, sub-prime borrowers will have about 50 percent less equity in their homes after just five years, the study said.

The study comes on the heels of ongoing congressional hearings into predatory lending and growing concern over the practice nationally. The Mortgage Bankers Association and other lenders are backing proposed laws to protect consumers from predatory mortgage lenders.

But some civil rights groups argue the rules would weaken existing, stricter state predatory lending rules.

In the case of Esquivel, he was specifically asked to make three post- dated payments of a reasonable amount. He was unaware that his payments were nowhere close to covering the interest and principle on his loan.

When the lender did not receive those higher payments, it foreclosed on his home. It has cost him months of worry and he blames his own inability to read English. Esquivel said his son guided him through his first home loan, which was problem-free. He no longer speaks to the friend who recommended the lender.

Latinos are the fastest-growing ethnic group in the country and according to earlier studies will account for 1.5 million home buyers nationally.

But not enough is being done to offer the community fair lending opportunities, Bowdler said.

The failure of traditional lenders to locate in areas with high concentrations of Latinos, employ more bilingual staff and provide more financial literacy contributes to the problem, she said.

Also, traditional lenders often do not consider the thinner credit histories low- to moderate-income Latinos are likely to have, relegating them to sub-prime loan rates. Anxious to take over this huge pool of business, the sub-prime lenders will employ full bilingual staffs and put borrowers at ease by coming to their homes to go over the contracts.

In recent years, the California Association of Realtors has begun offering training to its members to educate them on selling to the Latino community, while mortgage lenders have offered financial literacy courses in Latino neighborhoods.

``Certainly lenders recognize the Latino community is important,'' said Susan DeMars, executive director of the California Mortgage Bankers Association. ``There's been an outreach to this community. That will continue to take place.''

Rachel Uranga, [phone]

rachel.uranga(at)dailynews.com

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photo, box

Photo:

Honorato Esquivel's home went into foreclosure after he found the interest rate on a $15,000 loan was 108 percent. He has hired an attorney and the foreclosure was stopped.

Hans Gutknecht/Staff Photographer

Box:

PREDATORY LENDING

SOURCE: National Council of La Raza

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