Foreclosure in Santa Ana
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Good morning. The L.A.Times checks in on a foreclosure-in-process in Santa Ana, reporting that foreclosures are rising among non-English-speaking immigrants:
‘’We think this is just the tip of the iceberg, in terms of the breadth and depth,’ said Steve Harding, Santa Ana’s deputy city manager. Apart from the language barrier, he said, many first-generation immigrants might have been especially vulnerable to sub-prime lending because they avoided checking accounts and credit cards, which prevented them from qualifying for regular loans.’
The case described clearly involved fraud -- the borrower, a glass cutter who makes $9 an hour, estimates his family’s total income at $60,000; it showed up on the loan application as $157,000. The family borrowed 100% of the cost of a $615,000 house, and now the father -- the glass cutter -- is too sick to work, and they will likely lose the house.
Our take: We wonder how many loans like this the lender -- identified as Washington Mutual -- made. What passed for underwriting on this loan was fiction wrapped in false hope. Banks didn’t make bad loans like this because they were misled; they made them because they wanted to say yes.
But missing from the story is a hard reality: No matter how the loan -- in this case two loans -- was structured, this family probably could not afford to buy this house. Yes, it’s terrible that they were misled, and encouraged to believe they could afford it; it sounds like they got pretty crappy loans -- although, with no money down and a handful of hourly jobs, they were risky borrowers, so it makes sense the loans would be expensive. But foreclosure was almost inevitable from the day this family borrowed $615,000.
Your thoughts? Comments? E-mail story tips to lalandblog@yahoo.com.