by Cynthia De Castro/Asianjournal.com
LOS ANGELES — Economists last week reported that as the economic slowdown continues to deepen across the United States, immigrants are increasingly in danger of losing their jobs and their homes due to the consequent Jose de Venecia subprime mortgage crisis.
Many Hispanic and Asian immigrants are the usual targets of subprime lending (also known as B-paper, near-prime, or second chance lending) which is the practice of making loans to borrowers who do not qualify for the best market interest rates because of their deficient credit history.
The term “subprime” refers to the credit status of the borrower (being less than ideal), not the interest rate on the loan itself. Subprime offers an opportunity for borrowers with a less than ideal credit record to gain access to credit, such as immigrants. Subprime borrowers may use this credit to purchase homes, or in the case of a cash out refinance, finance other forms of spending such as purchasing a car, paying for living expenses, remodeling a home, or even paying down on a high interest credit card.
When the real estate market surged, legal and illegal immigrants joined Americans in buying homes they could barely afford. Even illegal immigrants were able to buy US homes during the boom years, either by showing evidence that they pay taxes or by simply presenting false documents.
Many of the subprime borrowers took out high interest fixed-rate loans with a low entry rate that later rose sharply. But as prices slumped in the past year, many have been caught with mortgages higher than the value of their homes.
“Economic conditions are deteriorating and many immigrants now can’t work those extra hours or find that second job to keep up with their mortgage payments,” said Aracely Panameno at the Center for Responsive Lending (CRL) research policy group.
A Filipino couple in Southern California shared with Asian Journal that their mortgage bills doubled over the past few months, now forcing them to look for second jobs. They say they’re now thinking of selling their home. But if they are unable to sell in the next few months, they may have to foreclose, meaning an even bigger financial loss and a damaging black mark on their credit record.
US President George W. Bush and Congressional leaders are working on an economic stimulus package worth almost $150 billion to fend off a possible recession, and Bush last month unveiled a plan to slow the wave of home loan foreclosures by freezing the rates on some subprime loans.
Experts say, however, most of the immigrants in financial trouble are either not entitled to help under the rescue plan or are not taking advantage of it.
“If this keeps up and we lose our homes, we’re thinking of going back to the Philippines,” related one FilAm immigrant.