Resources available for homeowners who fall victim to loan tactics

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>> To speak with an attorney about potential fraud in mortgages, call the Texas RioGrande Legal Aid hotline at (888) 988-9996. Information on the federal loan modification program is available at www.makinghomeaffordable.com.

It seemed like a harmless loan.

Holding down a steady job building scaffolds at refineries, Juan Rodriguez thought he could easily handle a $30,000 home equity loan to buy a new vehicle, catch up on taxes and pay off some debts. He took out the loan three years ago even after he found out at closing that the 9 percent rate he was originally promised would instead be 12.5 percent.

And then 14 months ago, Rodriguez was laid off from work.

The 47-year-old has been fighting ever since to keep his McAllen house, which was paid off before he took out the home equity loan. Perpetually behind on his payments by two months, he regularly gets letters warning that he’s at risk of foreclosure referral — all because of the home equity loan.

“I felt it wasn’t a bad idea to get the loan,” Rodriguez said Friday following a financial literacy fair hosted by Texas RioGrande Legal Aid and the Office of U.S. Rep. Rubén Hinojosa. “It was the biggest mistake I made in my life.”

Home equity loans have been a trouble spot for South Texas residents as the housing market has tumbled, said Kayla Dreyer, an attorney with Legal Aid. While the loans don’t reach the predatory tactics often employed by rent-to-own or payday loan companies, borrowers can get into the loans without fully understanding their obligations.

The incredibly complex legalese and financial language intimidates borrowers, especially Spanish-speakers with limited English proficiency who receive documents printed in English. Although Texas law included some of the strongest consumer protections in the nation for home equity loans when they were first allowed in 1997, homeowners face a very real risk of foreclosure if they fall behind on payments for such loans.

Dreyer and other advocates for low- to moderate-income families counseled homeowners at Friday’s workshop on forbearance agreements, loan modifications and other options they can pursue when facing foreclosure.

One option is the Home Affordable Modification Program signed into law by President Barack Obama that allows consumers to modify or refinance mortgages to make monthly payments more affordable.

Following complaints from housing advocates that the program wasn’t helping enough homeowners with reduced payments, the Obama administration announced changes in late March to assist more unemployed homeowners and help those whose home values had fallen so far that they owed more than their homes were worth.

If there was fraud in procuring the loans or how it was represented, Dreyer said, Legal Aid attorneys can usually help the homeowner. But in cases where the lender was straightforward about the agreement, borrowers must explore options such as bankruptcy or refinancing.

The workshop also served to educate families who don’t have access to mainstream financial products such as bank accounts and low-cost loans.

Low-income families may be suspicious of participating in the banking industry, said Salomon Torres, the district director for Rep. Hinojosa, D-Mercedes. As such, they may be unfamiliar with ways to save or invest.

“It’s easy to be a consumer,” Torres said. “It’s really tough to be a saver.”

In Rodriguez’s case, he regretted his decision to spend.

The home equity loan helped him take care of outstanding debts and get a new vehicle, he said. But it also put him in danger of losing his house when his steady job went under.

“I don’t want to lose my house,” said Rodriguez, who gathered information on loan modifications at the workshop. “That’s the only thing that I have for my family.”

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Jared Janes covers Hidalgo County government, Edinburg and general assignments for The Monitor. He can be reached at (956) 683-4424.