Hope in Homeownership

Despite Predatory Lending, the Future Looks Promising

San Francisco homeowners working with MEDA. Most homeowners are immigrants with limited English skills who lack financial savvy and are unfamiliar with the mortgage industry and its practices. View Larger >

The Mission Economic Development Agency (MEDA) is a housing counseling agency serving low- and moderate-income San Francisco families, many of whom are Latino. As early as 2006, we began to see a rise in the number of clients who were at risk of foreclosure on their homes. Most families were confused about why their mortgage balance was increasing, even though they were diligently making payments every month.

Many homeowners were victims of predatory lending and other deceiving practices that left homeowners in costly mortgage products that were inappropriate for their situations. For many families, meeting with a homeownership counselor at MEDA meant having their loan documents and mortgage terms explained for the very first time! Some homeowners were charged closing cost fees upwards of 15%. (Typical closing costs are around 3% of the mortgage loan.) We saw many instances where mortgage brokers had falsified income documentation, sometimes using fake pay statements even when borrowers had submitted their own. These types of mortgages followed a similar pattern: most loans had an adjustable rate, which increased significantly after a low introductory period, and many came with pre-payment penalties exceeding $20,000 that locked borrowers into bad mortgages.

Most homeowners working with MEDA are immigrants with limited English skills--they lack financial savvy and are unfamiliar with the mortgage industry and its practices. All relied heavily on brokers and other industry liaisons to help them navigate the financial system. Many of these brokers shared their clients' culture and language and drew heavily from the trust they derived from these shared backgrounds to "help" home buyers into their first home. Financial institutions, through their compensation structures and lax underwriting systems, laid the groundwork for the proliferation of risky, high-cost mortgages that fostered the foreclosure crisis in San Francisco and other communities across the country.

The patterns that we observed at MEDA and among communities of color and immigrant communities are well documented through data and research. But the story of the women in these communities has received much less attention. Women generally earn lower incomes and have limited access to educational and financial opportunities, so they are often financially dependent on others. Many immigrant women also come from cultures that discourage women from taking an active role in financial decisions, so women are often less likely to speak up and raise concerns during these types of transactions.

For these families, like most Americans, buying a home is so much more than a simple financial transaction. For immigrant families--particularly among the women that we work with--owning a home means establishing roots and showing the world that you've "made it" in a new country. For women who have children, homeownership also means security for future generations. Unfortunately, opportunistic mortgage brokers and real estate professionals exploited these aspirations to encourage families into bad loans.

Although the system-wide problems that confront women still exist in the mortgage industry, I have observed many encouraging signs that women are fighting for economic independence.

I am encouraged by women like Jacqueline, who refused to despair, despite being tricked into a bad loan and having a mortgage broker steal $200,000 from her family in the process. Instead, Jacqueline studied real estate to better understand her situation and then worked to mobilize and empower other victims of the same mortgage broker to speak up for themselves. With assistance from local non-profits, she and others were able to bring a lawsuit against the broker, who is now in jail for his illegal, predatory actions. Jacqueline continues to be a source of inspiration to the families that she organized. She is also an advocate for local policy changes that will ensure that families at risk of foreclosure get the help they need and that new homebuyers do not fall victim to predatory practices in the future.

I am also encouraged to see women defying social norms that tell them personal finances are a man's concern. At MEDA, women make up the majority of participants in the homebuyer education program. They work with counselors to improve their credit, increase their savings, and reduce their debt. These women are trying to make the long-term behavior changes that are necessary for strong and sustained financial success. Now more than ever before, these women recognize that financial decisions shouldn't rest solely with men, and they are becoming active participants and making more informed decisions in the home-buying process.

I am also encouraged by innovations within the nonprofit and public sector that provide opportunities for low-income community members to afford homes. These include unique matched savings and financing tools, down payment assistance and opportunities to purchase homes at below market rates. These strategies are making it possible for more low-income families and women to reap the benefits of home ownership and gain financial independence in a way that is long term and sustainable.

Looking ahead, these are the stories that make me hopeful that when we move beyond the foreclosure crisis, we will find ways to allow women to create true security and stability in their financial lives, as well as in the greater community.