Another reason we need a credit union to serve our community

The Harsh Side of the Housing Boom

Luis Mapula was living in a converted garage with his wife and two daughters and earning $54,000 a year as a fence company construction worker. Then, almost like magic, he became the owner of a $543,000 home with no down payment.

Situated on a quiet cul-de-sac off Quimby Road in East San Jose, the two-bedroom home was to have been his family's piece of the American dream. Instead, it became a financial trap that consumed most of Mapula's income. He got out only after his real estate broker took back the home and paid off the loan as part of a legal settlement.

Renters once again, the family has no plans to buy another home.

"Better a garage than live without enough to eat," Mapula's wife, Cristina Plata, said through a translator.

The couple are among a growing number of Latinos in Santa Clara County who say they've been victimized by a dark side of the housing boom in which people who speak limited or no English bought homes they couldn't afford based on exaggerated statements of income they say they knew nothing about. The deals generate commissions and fees for a chain of intermediaries, but can leave home buyers in foreclosure with ruined credit.

In most of the cases examined by the Mercury News, buyers complain that their loan disclosures weren't translated into Spanish, as required by law, and that they didn't understand the terms of their loans. Their stories reflect a national problem that is particularly acute in California, where thousands of lower-income families became first-time homeowners during the housing boom by getting non-traditional "subprime" loans. Those loans, which carry higher interest rates, typically have been given to borrowers who are higher credit risks or have income that is difficult to verify. But as lenders face a wave of defaults, they're getting stricter about who receives money just as borrowers are trying to refinance their way out of mortgages they can't afford.

Loan applications

Borrowers signed

mortgage papers

It's not always clear whom to blame when false statements appear on loan documents or when payments are obviously more than the buyer can afford, because the buyers sign the papers.

Attorneys say their clients, largely lower-income, Spanish-speaking buyers who did not understand what they were signing, were misled by real estate professionals whom they trusted.

Read the entire article here.