PHOENIX (By Craig Harris, Arizona Republic) June 26, 2005 - When Adan Salcido couldn't afford to buy a
home three years ago, he agreed to rent a two-bedroom west Phoenix
condominium and purchase it by this summer.
As a show of good faith, Salcido put down $2,000 at the time, and he had until June 30, 2005, to come up with the remaining $43,000, according to a June 2002 contract he signed with the property owner.
Now, even though Salcido has obtained a loan for his first home, he and his pregnant wife and two children are facing a July 7 eviction, according to a termination notice from the property owner, Roy Fagan.
Salcido, who said he never missed a rent payment in three years, said Fagan told him that he wants an additional $10,000 for the home because property values have increased since the contract was signed.
The contract does not include a provision for raising the price. Fagan declined to answer questions from The Arizona Republic.
Roxanne Stark, an organizer with the community group ACORN, said Salcido's situation represents a growing problem in the Hispanic community, and is the latest form of predatory lending. She said that is because Salcido may be pressured into a high-cost loan to keep the property.
Predatory lending typically includes high-interest loans, sizable upfront fees or hefty prepayment penalties, which keep buyers from refinancing when interest rates go down.
"It's not just loan officers or brokers, it's now the sellers," said Stark, a lead organizer for the Association of Community Organizations for Reform Now. "They (the Salcidos) have done everything they have to do, but the chance of losing their home is great."
The National Council of La Raza, one of the nation's largest Latino advocacy groups, last month released a study that found Latinos are much more likely than Anglos to be steered into high-cost loans.
"It's still a significant problem, whether you are on the purchasing end or the refinancing end," said Janis Bowdler, a housing policy analyst for the Washington, D.C.-based La Raza. "It (predatory lending) strips equity . . . That is critical, especially for a low-income family where home ownership is their only access to building any wealth."
In Arizona, the primary targets for predatory lending are Hispanics and the elderly, according to the Attorney General's Office.
"Many of the attorneys general, if not all, are very concerned about the high-cost loans that are being thrust upon many, many people in their states by unscrupulous salespeople," Attorney General Terry Goddard said. "They are just charging as much as they can get away with. It's that kind of predatory lending practice that is despicable."
Andrea Esquer, a spokeswoman for Goddard, said predatory-lending complaints rank among the top 10 consumer complaint categories in Arizona, with problems on auto purchases and repairs ranking No. 1.
"We know it's a growing problem," Esquer said, "but we don't have predatory-lending statutes in place to give us a clear-cut case . . . Now someone can charge any amount of interest on a loan and can pretty much set the terms for a loan."
Robert Zumoff, an assistant attorney general who works on predatory-lending cases, said that the agency has worked on predatory-lending legislation for the past three years, but it "has not borne any fruit."
Critics contend that creating tough predatory-lending laws would drive away sub-prime lenders, who make higher-interest loans to those with bad credit and who cannot obtain mortgages from traditional lenders.
Esquer said that has not been the case in other states such as North Carolina, which has cracked down on predatory lending.
Goddard has pushed for the elimination of prepayment penalties and would require that high-interest rate lenders inform borrowers that mortgage counselors are available under certain circumstances.
Those circumstances include an interest rate more than 8 points above the Treasury rate for a loan of the same term, or if points and fees exceed 5 percent of the value of a loan.
Goddard's office also would like to see high-cost loans that were negotiated in a language other than English be translated into that language on the loan documents.
Stark with ACORN said her office is helping Salcido in his effort to buy his home, and the group has contacted Goddard's office for assistance.
The state, however, receives so many consumer complaints that it often is months before any action is taken, Esquer said.
Salcido, a painter, said he cannot borrow any more money, and he is angry his family is facing eviction.
"I'm just looking for help," he said.
An attorney for Fagan, the property owner, did not return calls. When contacted, Fagan said he had "no idea what you are talking about," and hung up the phone.
As a show of good faith, Salcido put down $2,000 at the time, and he had until June 30, 2005, to come up with the remaining $43,000, according to a June 2002 contract he signed with the property owner.
Now, even though Salcido has obtained a loan for his first home, he and his pregnant wife and two children are facing a July 7 eviction, according to a termination notice from the property owner, Roy Fagan.
Salcido, who said he never missed a rent payment in three years, said Fagan told him that he wants an additional $10,000 for the home because property values have increased since the contract was signed.
The contract does not include a provision for raising the price. Fagan declined to answer questions from The Arizona Republic.
Roxanne Stark, an organizer with the community group ACORN, said Salcido's situation represents a growing problem in the Hispanic community, and is the latest form of predatory lending. She said that is because Salcido may be pressured into a high-cost loan to keep the property.
Predatory lending typically includes high-interest loans, sizable upfront fees or hefty prepayment penalties, which keep buyers from refinancing when interest rates go down.
"It's not just loan officers or brokers, it's now the sellers," said Stark, a lead organizer for the Association of Community Organizations for Reform Now. "They (the Salcidos) have done everything they have to do, but the chance of losing their home is great."
The National Council of La Raza, one of the nation's largest Latino advocacy groups, last month released a study that found Latinos are much more likely than Anglos to be steered into high-cost loans.
"It's still a significant problem, whether you are on the purchasing end or the refinancing end," said Janis Bowdler, a housing policy analyst for the Washington, D.C.-based La Raza. "It (predatory lending) strips equity . . . That is critical, especially for a low-income family where home ownership is their only access to building any wealth."
In Arizona, the primary targets for predatory lending are Hispanics and the elderly, according to the Attorney General's Office.
"Many of the attorneys general, if not all, are very concerned about the high-cost loans that are being thrust upon many, many people in their states by unscrupulous salespeople," Attorney General Terry Goddard said. "They are just charging as much as they can get away with. It's that kind of predatory lending practice that is despicable."
Andrea Esquer, a spokeswoman for Goddard, said predatory-lending complaints rank among the top 10 consumer complaint categories in Arizona, with problems on auto purchases and repairs ranking No. 1.
"We know it's a growing problem," Esquer said, "but we don't have predatory-lending statutes in place to give us a clear-cut case . . . Now someone can charge any amount of interest on a loan and can pretty much set the terms for a loan."
Robert Zumoff, an assistant attorney general who works on predatory-lending cases, said that the agency has worked on predatory-lending legislation for the past three years, but it "has not borne any fruit."
Critics contend that creating tough predatory-lending laws would drive away sub-prime lenders, who make higher-interest loans to those with bad credit and who cannot obtain mortgages from traditional lenders.
Esquer said that has not been the case in other states such as North Carolina, which has cracked down on predatory lending.
Goddard has pushed for the elimination of prepayment penalties and would require that high-interest rate lenders inform borrowers that mortgage counselors are available under certain circumstances.
Those circumstances include an interest rate more than 8 points above the Treasury rate for a loan of the same term, or if points and fees exceed 5 percent of the value of a loan.
Goddard's office also would like to see high-cost loans that were negotiated in a language other than English be translated into that language on the loan documents.
Stark with ACORN said her office is helping Salcido in his effort to buy his home, and the group has contacted Goddard's office for assistance.
The state, however, receives so many consumer complaints that it often is months before any action is taken, Esquer said.
Salcido, a painter, said he cannot borrow any more money, and he is angry his family is facing eviction.
"I'm just looking for help," he said.
An attorney for Fagan, the property owner, did not return calls. When contacted, Fagan said he had "no idea what you are talking about," and hung up the phone.
