A New Post By Dan Melson
Mortgage Loan Broker - California
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Tony saw this on my own site and asked me to reprint it here (Sorry it took me three days). It's a reprint of a thirty month old article, and the article that inspired it is no longer available. It reported on the high gap in cost and rate between loans that what I'll call "white people" get and loans gotten by various minority groups. The original article was titled, "Racial Gap in Loans Is High in California", and from this point, the text is straight out of the reprint:
"Racial Gap in Loans Is High in California"
I can give a variety of reasons for this.
First off, especially in Los Angeles but to a lesser extent throughout the state, there is a huge "Spanish speaking only" community. When you limit yourself to speakers of a language which isn't the nation's primary business tongue, you limit your ability to find loan officers who will treat you honestly and fairly and find you the best possible loan. I speak reasonable spanish myself, but not nearly enough to do a loan.
Second, those who speak spanish only are ripe pickings for unscrupulous loan officers and real estate agents. Because they do not understand english, the language the regulations are written in, they have less understanding of what is a complicated and confusing process for anyone who is not a practicing professional. In fact, I can name a lot of alleged professionals who speak English and are nonetheless limited in the comprehension of the process to judge by the evidence.
Third, those who speak Spanish only have a lesser understanding of their rights under the law, and since the vast majority of all loan documents are in English (a few lenders are starting to generate a few documents in Spanish, but not every document, and it will never be the main copy of anything), they have a lesser understanding of what they are agreeing to.
Gee, I hope the preceding helps the "Spanish only" lobby of separatists understand what they're setting up for the people whose benefit they are allegedly advocating.
But more importantly than all of the preceding, real estate and loans are "sales connection" businesses. Because most people do not shop for homes or home loans in a rational fashion. "I can't be rational! This is far too important for that!" Seems silly, but it's true. People buy or do business with you because you have made them more comfortable, or because they think you can do something nobody else can or will for them. They do business because they connect with you on some level, not because what you're offering is the best thing out there.
Identity politics exacerbates this. There are agents out there (often but not always necessarily of the same ethnicity) whose niche market is "black folks", or "Spanish speakers" or "Koreans". Some people will do business just because you're the same, or because they feel some kind of cultural connection. Others will do business because you helped their brother, or friend, whether said brother was the toughest deal in creation or the easiest thing you ever did. And if you brother had to do something, or had something happen, it's only normal it should happen to you, too - right? One of the standard phrases in the sales lexicon is "My you were tough, but we got it done! How about some referrals." This by itself is not evil. But if you've taken advantage of someone as if they were a tough loan when in fact they were not and could have gotten a better deal from someone else, you're lining your pocket at your client's expense. Everybody deserves to get paid for a job well done. But when my contacts in the escrow and title business tell me about people who only serve this ethnic market or that ethnic market who have six percent state of California limits on their compensation externally applied to every single loan they do, or how these people consistently have a sales compensation a full percent above the market, that tells me something: that these alleged professionals are taking undue advantage of their target market. Many of these people they are targeting literally have no way of knowing there is something better out there. Are their tactics illegal? No. Unethical? In at least some cases. Taking advantage of client ignorance? Definitely.
The process of purchasing, selling, or refinancing real estate is byzantine, with rules and regulations that get more complex every year. The average citizen has difficulty understanding the things that may be relevant to their particular transaction (I've had to explain to <i>lawyers</i> how they got taken in their previous transaction). To most people, the whole thing is like some immensely complicated magical ritual. Place the proper documents at the foot of the underwriting god, dance three time sunwise and four times widdershins round the appraisal every day for a fortnight, pray with the high priests of insurance, and you get your house.
It has elements in common, I will admit. But the processes of real estate sales and real estate loans are coldly, brutally, logical once you understand them. Unfortunately, the odds of understanding are stacked even further against those who are apart from the majority of society. Those who are concerned with minorities having inferior loans would have more success in connecting the people to the mainstream of society than in considering further burdensome anti-discrimination legislation.
Caveat Emptor
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A New Post By The Mortgage Cicerone.
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