Immigrant borrowers caught in U.S. language loophole
Gina Keating
Yahoo News
Mar 19, 2007
LOS ANGELES (Reuters) - In California's bustling economy, immigrants can rise so fast their language skills may lag behind their buying power, which consumer advocates say landed many non-English speaking borrowers with subprime mortgages they did not want.
Mortgage brokers have been slipping through loopholes in state civil codes requiring lenders to provide mortgage disclosure documents -- delineating interest rates, payment amounts and other vital deal points -- in the language in which the transaction was negotiated.
"There's a lot of room for fraud," said Oscar Medellin, a lawyer for the nonprofit Public Counsel in Los Angeles.
Public Counsel filed suit on Friday against Lifetime Financial, a Los Angeles mortgage broker, on behalf of Jose Moreno, a Spanish-speaking borrower who says he ended up with an adjustable mortgage and thousands of dollars in fees he didn't expect after he signed loan documents in English.
A Lifetime Financial representative could not immediately be reached for comment.
Although California law mandates that mortgage disclosures be provided in five languages other than English, if needed, it applies only to brokers who operate under real estate licenses, according to a state Department of Real Estate spokesman.
Those five languages -- Spanish, Chinese, Tagalog, Vietnamese and Korean -- are spoken by 83 percent of the 12 million Californians who don't speak English in their homes, according to the 2000 U.S. Census.
With its overheated housing market and sky-high prices, California became a haven for subprime mortgages, which account for more than a fifth of all the state's mortgages, according to First American Loan Performance.
Add to that a highly mobile immigrant population with rising incomes and you have a recipe for fraud, consumer advocates say.
"This is the perfect example of buyers who were being hoodwinked," said Kevin Stein, associate director of the nonprofit California Reinvestment Coalition.
"Many borrowers were sold loans they could not afford and could not understand because of improprieties of the brokers ... and Wall Street."
Stein and other housing advocates petitioned the Federal Reserve at a hearing this summer in San Francisco to strengthen laws requiring disclosures in non-English languages.
