**[Predatory Lending: Disproportionately Targeting Latinos Seeking the
American Dream]{.smallcaps}**

Homeownership is the key to unlocking the American dream for many
Latinos. Today, almost 50 percent of Latinos own their own home, and by
the year 2010, 1.5 million Latino families will own homes. On average,
63 percent of Hispanic household wealth comes from ownership equity
alone, the highest percentage of any group. Without a doubt,
homeownership has the power to make the American Dream a reality.

However, predatory lending is making a mockery of the American dream for
far too many Latinos. Hispanics are more likely to be targeted for
subprime loans because of limited access to other loan products, lack of
knowledge about the process, or lack of credit history. As a result,
Latinos are at an increased risk for default and foreclosure. The number
of new foreclosures reported during the fourth quarter of 2006 reached
the highest level in 40 years, and, not surprisingly, foreclosure and
delinquency rates were the highest among subprime loans. With the
economic pressures of rising interest rates, increased debt, and
depreciating wages further squeezing Hispanic households, predatory
loans are making the American dream even more elusive for Latinos.

-   **Limited Knowledge of the Lending Process:** The wide range of
    options and level of complexity in mortgage products today make it
    very difficult for consumers, especially Latinos, to fully
    understand what loans they are signing up for. The primary
    difficulties for Latinos who are planning for homeownership are lack
    of familiarity with the mortgage process and finding a trustworthy
    advisor. In fact, even Latinos with good credit who are eligible for
    prime loans are steered toward non-traditional subprime loans, an
    indication that Latinos are deliberately targeted by predatory
    lenders.

-   **Pushed into Poor Financing Schemes:** Latinos are more likely to
    lack a credit record and have significantly lower incomes than
    whites, disqualifying them for prime lending rates. As predatory
    lending occurs predominately in the subprime market, Latino
    borrowers are often at the highest risk to end up with costly and
    poorly-financed mortgages. Latinos are more likely to be subject to
    high interest rates not justified by risk, mortgage broker
    kickbacks, unwarranted prepayment penalties, excessive fees, and
    unjustifiable penalties. According to the National Council of La
    Raza, Latinos are twice as likely as whites to be financed into
    expensive, subprime mortgages.

-   **Alienated by Language and Cultural Barriers:** More than any other
    ethnic group, Hispanics prefer to work with lenders who speak their
    own language, and tend to feel uncomfortable handling business
    transactions in English. However, mainstream lenders have been slow
    to address the needs of Latino borrowers, and in their place, more
    aggressive and dishonest lenders have stepped in to fill that void.
    Once they become the victim of a predatory lender, Latinos are
    hard-pressed to apply for recourse because cultural and language
    barriers make it difficult to navigate through formal bureaucratic
    channels, which can be intimidating, complex, and confusing.

Empowering the Latino community means helping Latinos make informed
financial decisions when they borrow money or take out a loan. That is
why those who engage in predatory lending practices must be held
accountable. Democrats understand that we must continue to address
predatory lending through vigorous enforcement of safety and soundness
standards, consumer protection, financial education programs, credit
counseling, and a new legislative solution.