Hollister - Despite making only $14,000 a year, strawberry picker Alberto Ramirez managed to buy his own slice of the American Dream. But his Hollister home came with a hefty price tag - $720,000.
A year and a half later, Ramirez has defaulted on his loan, and he's hoping to sell the house before it's repossessed. And according to many housing advocates and civil rights groups, Ramirez is not alone. As mortgage foreclosures rise, many minorities are suffering.
In April, the Leadership Conference on Civil Rights, the NAACP, the National Fair Housing Alliance, the National Council of La Raza and the Center for Responsible Lenders called for a six-month moratorium on subprime home foreclosures. Those groups reported that minorities receive a disproportionate share of riskier subprime loans, and while those loans make up only 13 percent of the overall mortgage market, they account for more than 60 percent of new foreclosure filings.
Heidi Li, co-director of the Oakland-based Housing and Economic Rights Advocates, agreed that minorities and non-English speakers are being hit particularly hard by the foreclosure crunch. Li's organization has seen a dramatic increase in mortgage-related complaints in the past few weeks, and she said non-English speakers account for between one-third and one-half of those calls.
"Most people are vulnerable when it comes to mortgages, because the situation is very complex," HERA Co-Director Maeve Brown said. "But (people of color) feel our choices are more limited; therefore we're more vulnerable to those limited choices."
Brown said the language barrier (Ramirez, a native Spanish speaker, is not fluent in English, and spoke to the Free Lance through a translator) can also play a big role.
"When you go into Washington Mutual ... you can't always get someone to speak your language," she said.
Deidre Swesnik, director of public policy and communications at the National Fair Housing Alliance, said non-English speakers and minorities have been targeted by subprime mortgage brokers. A study by the National Council of La Raza showed that nearly all mortgage advertisements in Spanish-language newspapers were for subprime brokers, Swesnik said.
But Rafael Cebrero, whose company Rancho Grande Real Estate sold Ramirez his home and arranged his mortgage, said subprime loans are getting a bad rap. Those loans, he said, have made it easier for many people, including Latinos, to purchase a home.
So how did Ramirez, the strawberry picker with an annual income of just $14,000, purchase a $720,000 home in Hollister without any money down?
He had help, for one thing. Although Alberto Ramirez was the only one to sign the purchase agreement and the only one named on the loan documents, he actually bought the house with his wife Rosa Ramirez, as well as their friends Jesus Martinez and his wife. However, even in a good month, the Ramirezes and Martinezes together don't earn much more than a combined $6,500, and their official monthly payments were around $5,200.
Karl Skow, president of the Greater Monterey Bay Area Chapter of the California Association of Mortgage Brokers, said that as a rule of thumb, people shouldn't pay more than one-third of their income for their housing. In California, where homes are more expensive, that's a little unrealistic, Skow said, but he said most lenders still draw the line at 50 percent.
With their combined incomes, the Ramirezes and the Martinezes estimated that they could afford monthly payments of $3,000 - around 50 percent of their income. However, the Ramirezes said Rancho Grande real estate agent Maria Avila promised they could refinance their home in three to six months to an affordable rate; until then, Rosa Ramirez said, Avila said she would pay for whatever they couldn't afford.
Avila did supplement the mortgage payments on the Hollister home, paying about $2,200 per month for nine months.
But the refinance never happened, and Martinez said Avila stopped helping with the payments at the end of 2006. A notice of default has been filed on the home, but no foreclosure date has been set, and the Ramirezes and the Martinezes are hoping they can sell the house before they lose it in a repossession.
Cebrero said the Ramirezes' and Martinezes' situation is an unfortunate one, but he said Rancho Grande was only trying to help the two families buy the home they wanted.
"We feel we have done as much or more than we can do for these clients," he said.
However, Pamela Simmons, whose Soquel law firm Simmons and Purdy is representing the Ramirezes, said the loan should never have been made. Simmons and Purdy attorney Alison Lawton said the firm sent a letter of demand to Rancho Grande in February alleging that Avila knew Alberto Ramirez could never afford the house and that she made the deal only for personal profit. Lawton said Simmons and Purdy are currently in settlement negotiations with Rancho Grande's attorney, but if they can't come to an agreement, the law firm plans to file suit.
Simmons said predatory lending and subprime mortgages aren't a new phenomenon, but back when the area's housing market was red hot, people who signed up for unaffordable loans could just sell their houses. As the housing market has slowed, more cases have come to light.
"The real estate boom covered a multitude of sins," Simmons said. "Once the market started depreciating, the rug was pulled back to show the rot underneath."
Anthony Ha Anthony Ha covers local government for the Free Lance. Reach him at 831-637-5566 ext. 330 or aha@freelancenews.com.
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