Predatory Lending

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Arizona Attorney General Terry Godard talks about predatory lending, a fraudulent practice aimed especially at minority communities.

>> José Cárdenas:
Good Evening, I'm Jose Cardenas, and welcome to "Horizonte."

>>> A new taskforce is launched to combat human smuggling. tonight we'll talk to an "Operation Ice Storm" special agent.

>>> And Arizona's high school dropout rate is among the highest in the nation. We'll talk about a recent national conference held at ASU on school completion.

>>> And minorities tend to be victimized more by predatory lending. we'll hear from the Arizona Attorney General about protecting yourself from being a victim.

>> José Cárdenas:
Earlier this week, the Bureau of Immigration and Customs Enforcement joined forces with local police and Homeland Security to launch "Operation Ice Storm" a program to combat human smuggling.

>> Reporter:
With the South Mountains as backdrop, law enforcement officials and legislators launch an initiative to combat human smuggling. Authorities say the smuggling of people across the border has resulted in a 50% increase in homicides over last year and also significant increases in extortion, kidnapping and home invasions.

>> Harold Hurtt:
Back in October, three people were kidnapped and held for six days, a $15,000 ransom was demanded. They were demanding from the families of these individuals back in Mexico. At the time that they were rescued, the victims were bound, head to toe with duct tape and were in a very serious mental condition. Had it not been for the cooperative efforts of the Phoenix Police Department and "Ice," the lives of these individuals could certainly have been lost.

>> Reporter:
The initiative had been planned for sometime, so organizers of this event are stressing the point that the shootout on I-10 that coincidentally occurred during President Vicente Fox's visit to Phoenix was not the impetus of the news conference. Congressman J.D. Hayworth, John Shadegg and Jeff Flake emphasize their support for the plan.

>> Rep. J.D. Hayworth:
With Phoenix facing a nearly 50% increase in homicides and nearly a 400% increase in home invasions, "Operation Ice Storm" is a sobering, alarming wake-up call for the people of Arizona. It says to us that to a greater degree than at any other place in our nation, our security in Arizona is being threatened by the ruthless culture of crime and violence that surrounds illegal immigration. I have high confidence that this unprecedented assault on the vicious criminals who smuggle, murder, rape, enslave and exploit illegal aliens will be successful. However, it is crucial that the people of Arizona and indeed the people across America, view "Operation Ice Storm" as only one small part of the comprehensive approach we must take in order to reform our national immigration policies and laws.

>> José Cárdenas:
Joining us today to talk about "Operation Ice Storm" and the new taskforce is special agent and group supervisor from the Human Trafficking Division, Angel Rascon. Welcome, AngeL.

>> Angel Rascon:
Good evening.

>> José Cárdenas:
Tell us about the details of "Operation Ice Storm."

>> Angel Rascon:
It is a package of resources brought to Phoenix to supplement the existing agents that we have at the moment. We have now brought to bear 50 special agents to combat the smuggling problems that we have encountered here for a number of years now.

>> José Cárdenas:
This is 50 additional agents?

>> Angel Rascon:
That is correct, sir.

>> José Cárdenas:
The point was made on the tape that this was not in response to the shooting incident that occurred during President Fox's visit last week. But it is a response, is it not, to the increased level of violence among smugglers?

>> Angel Rascon:
It is in fact a direct response primarily in relationship to the violence associated with human trafficking. In fact, it is not related to the President Fox's visit or the events that happened on I-10 last week.

>> José Cárdenas:
Why has the level of violence increased?

>> Angel Rascon:
Primarily it is due to a number of factors. The added increase along the border by the border patrol and other enforcement activities along the southwestern borders has increased the value of each person being smuggled across the border and into Phoenix and this is the hub of the human trafficking organizations. This is a point where they collect funds and send these aliens outward to their final destination point. So the added enforcement makes each human a little bit more valuable to each organization, hence the level of the smuggling fees has increased and the greater value to that person.

>> José Cárdenas:
There has been some suggestion in the press that we have drug smugglers switching to human smuggling. Do you think that's part of the reason for the increase in violence?

>> Angel Rascon:
I would agree with that. I have seen individuals that would normally be involved in narcotics trafficking engage in human trafficking. I attribute that to principally that, four, five years ago when he I began to see this trend, those individuals that would normally smuggle narcotics saw an easier way to make the same if not more money without facing the same criminal penalties, hence the movement to human trafficking.

>> José Cárdenas:
We know on the drug smuggling side that many of the gangs operate out of states like Sinaloa, which is south of Arizona. Is there any particular area where we see the human smugglers come from?

>>Angel Rascon:
Not particularlily. I've seen them from central America, South Americans and Mexicans as well, but not any one particular state. I have heard and have had a lot of contact with individuals from the State of Sinaloa.

>> José Cárdenas:
"Operation Ice Storm" is focused on Arizona; is that right?

>> Angel Rascon:
It is focused on the Phoenix activity, principally.

>> José Cárdenas:
And the level of activity has increased in recent years?

>> Angel Rascon:
Tremendously. The violence associated with human trafficking has literally shot through the roof. There is homicides associated now with human trafficking. Exploitation in the ways of rape, physically assaulting the very aliens that they smuggle in. So the overall level of violence has increased tremendously.

>> José Cárdenas:
We saw Chief Hurtt on the tape. What will be the role of local law enforcement?

>> Angel Rascon:
To participate in a homicide/smuggling investigation, the Phoenix Police Department and other local and state departments would help Ice conduct the homicide investigation alongside of our alien smuggling investigation. Together we form a powerful unit that we can attack on both sides of both the state level and of course the federal level.

>> José Cárdenas:
And some of the information released by Homeland Security suggests that there will be heightened presence at the airport. Who will be conducting those operations?

>> Angel Rascon:
The U.S. Border Patrol has assumed that responsibility at the various airports within our state and Nevada and other airports as well. They have also added increased patrols to the I-10 corridor between the border and leading up to Phoenix.

>> José Cárdenas:
How do you actually do that without engaging in racial profiling? How can they detect smuggling activity at the airport?

>> Angel Rascon:
Through training and experience. Training allows an agent to detect a cargo vehicle in transit, and the experienced agent knows again by training and years of experience, what type of vehicle is used most commonly by human traffickers.

>> José Cárdenas:
You do hear stories of people who are U.S. citizens, born here, dark skinned, who have gotten stopped at airports and asked for their documents. Is that something that's more of a thing of the past because of this heightened training you referred to or is that something to be concerned about?

>> Angel Rascon:
At the moment with the focus on human traffickers, they are looking -- the agents are focusing on groups that are being guided through the airport at various stages, the ticketing agent and through the checkpoint itself. In the past, however, the increased level of alerts, such as post 9/11, increased to a broader scope, but at the moment, the focus will be on human trafficking, and again, having said that, groups of aliens or individuals being traversed through the airport.

>> José Cárdenas:
The focus is on smugglers, what about the employers who these smugglers are supplying?

>>Angel Rascon:
We have added 50 agents to focus on human trafficking. Our priority does not include the employers in this package; however, we did participate in the Wal-Mart operation that was well published a few weeks ago.

>> José Cárdenas:
I would think the assumption is that you are going to need Spanish-speaking agents, presumably Hispanics, to participate in the undercover activities that will be involved here. Do you have the resources? Do you have a number of Spanish-speaking agents to accomplish that?

>> Angel Rascon:
At the moment I would say we do, but there is always a need for more Hispanic agents that are fluent in Spanish, not just for undercover work but to speak or interview or interrogate individuals suspected of human trafficking at a greater exchange in conversation. Obviously our English -- or nonspanish speaking agents have difficulty in conversing with some of our targets.

>> José Cárdenas:
Angel Rascon, thank you for joining us on "Horizonte."

>> Angel Rascon:
Thank you, sir.

>> José Cárdenas:
Despite efforts by educators, families and communities, Arizona's dropout rate continues to be high. A national conference was held in Arizona last week to address that issue. The Southwest Conference on enhancing school completion was hosted bY ASU. In a moment, we'll talk about that with Dr. Eugene Garcia. First, Merry Lucero tells us about a program that fosters responsible business leaders and mitigates the high school retention problem facing our community and our state.

>> Jeanine Aguilar:
So we have one half of the negative second. Cesar, what's my shortcut?

>> Reporter:
These Tolleson High School students toil away in what appears to be a typical math class, but it isn't. This is Roedel (phonetic) math. These students are packing two years of high school math courses into one. It's part of Roedel Community Scholars, a unique program that pairs ASU business honor students with promising local high school students at schools that report high dropout rates. Program director Raul Cardenas. >>Raul Cardenas: They have been interested in how do we impact our undergraduate business students to have a greater sense of civic leadership, civic understanding? And the best way that we felt that we could do that is to ground them in the skills that they know. They know business. They don't know how to do a lesson plan, as an education major may. They don't know how to do maybe various other skills, but they know how to do business and they know how to do a business plan.

>> Jeanine Aguilar:
Because we're dealing with money, what do we always round to?

>> Reporter:
ASU Roedel Scholars develop business plans addressing student retention, then they help implement the plans through workshops and a summer program. Teacher Jeanine Aguilar says the program helps them focus on careers.

>> Jeanine Aguilar:
Most kids want to go to college, they have goals, but they don't know who to talk to, especially in public education, counselors are overwhelmed. They don't have time to -- this kid wants to go into a nursing program, I'm going to spend the next hour or two working with that kid, you know, let's find out programs about -- they don't have time for that. And the Roedel program looked at that.

>> Reporter:
Using the Roedel scholar's business plan, Tolleson created an advising period on college students. Without that, students can lose their way, despite efforts of teachers and parents.

>> Jeanine Aguilar:
I think every teacher has their story of the kid where they really try, put their effort. You go that extra mile. You build the relationship. You contact the parents and try to motivate them. You try to show them the opportunities, but I think sometimes the students' environment becomes overwhelming and they get lost in the system.

>> Reporter:
Josh Espinoza is a recipient of the Roedel program. Has he ever thought of dropping out of high school?

>> Josh Espinoza:
Yeah, I have. There is so much pressure in that school with all kinds of homework and stuff, and it just puts a lot of pressure and then work afterwards, you know, after school, and work, school work and all of that stuff. And so I felt that pressure and -- but I get home, and I realize that, you know, if I don't finish high school, then there aren't going to be that many benefits and opportunities out there.

>> Reporter:
ASU Student David Wahls is a Roedel scholar. He enjoys helping students find their way towards the process towards college.

>> David Wahls:
We start with tutoring and form relationships there and from there they trust us to help them with college experiences.

>> Raul Cardenas:
Our college students provide the "why" to the question, why do I have to go to college, why do I have to do algebra, why do I have to sit through Ms. Aguilar's class. This is why. This is why. This is what we did and why we did it, and this is why you probably should do it.

>> Reporter:
Tolleson is one of several valley high school students participating in the program which is still evolving. It's a learning process for all involved.

>> David Wahls:
The group before us who had been in Tolleson said you are going to find they don't have a lot of support in a lot of different areas, and they don't have some of the parental support may not be there and we found some of those things but then we found the extent that it was. We were thinking it was going to be drugs and alcohol and teen pregnancy. And it really wasn't -- those weren't the factors. It was just that the students need support. They need to have someone behind them saying "go, you can do it, you can succeed and you can do whatever you want to do."

>> José Cárdenas:
Here to talk about school completion and the recent conference is Dr. Eugene Garcia, Vice President of University School Partnerships and dean of the ASU College of Education. Dr. Garcia, thank you for joining us on "Horizonte." How was the conference?

>> Eugene Garcia:
It was exciting. We had people address a number of important issues related to dropouts, school -- we got called schooled completion instead of the negative, and a good focus on Latino students in the southwest.

>> José Cárdenas:
What was the assessment of the situation?

>> Eugene Garcia:
Probably three things, particularly for Hispanic students. We are undercounting the number of students who are actually completing high school. Estimates range from anywhere from 60-70% of students completing high school in Arizona and throughout the southwest, and our researchers at the conference indicated that it's probably closer to 50% of Hispanics completing high school in the southwest.

>> José Cárdenas:
The problem is worse than we thought?

>> Eugene Garcia:
There is always a problem in defining what we mean by "dropout." It's not hard to find who completes high school, but what is a dropout. We had discussion about a better definition, but whatever definition we use, there are too many Hispanic dropouts in the southwest.

>> José Cárdenas:
Was that 50% figure overall or was that the Hispanic dropout rate?

>> Eugene Garcia:
That was overall with the Hispanic dropout below that.

>> José Cárdenas:
In Arizona?

>> Eugene Garcia:
In Arizona.

>> José Cárdenas:
What are the other points?

>> Eugene Garcia:
The other points are what do you do about them, and one is the program you just saw, the Roedel scholars program working with teachers and schools can make a difference in kids' lives. They can make the school a better place for those kids so that we've found -- we had examples of programs in Albuquerque New Mexico, San Antonio Texas, Yuma, Arizona. We had high school kids talk to us about why those schools made a difference. So can schools make a difference for kids? Can they keep them in school, particularly Hispanic kids? Yes. That was important finding. We needed to know the attributes of those programs. The other thing important is the importance of the family and the parents. That is, students reported to us personally as they talked to us that it was their family, their parents, who continued to encourage them to go on to high school. As we looked at the reports from Yuma and San Antonio and Albuquerque, again, parents, family, who understood the importance of education, not only understood it, but helped their kids and encouraged them to go on and stay in school.

>> José Cárdenas:
I assume it's true for all ethnic group, but is it particularly important for Hispanics?

>> Eugene Garcia:
It's particularly important for Hispanics. It's important for everyone, but it's important for Hispanics because so many of our parents have not succeeded and graduated from high school. If the dropout rate is 50% and it's probably worse in previous decades, then those parents who are sending their kids to school now have not had a high school education themselves. So it's knowing what it takes and passing that onto the children. So many of the programs try to encourage and have parents under stand the importance and then the things about how you succeed. Get get your homework done, attend every day, get involved in extracurricular things, sports and whatever, all of those things that parents can encourage kids to do, and essentially say to them it's important for you to go to high school, even though I didn't go.

>> José Cárdenas:
The newspapers earlier this week reported on the efforts by the national PTA to get greater involvement by Hispanic parents. Do you think that will have any impact?

>> Eugene Garcia:
It has to. Our parents need to understand how their kids can succeed in school. PTA is one way to do that. I applaud them for realizing that in a few years, the majority of students in schools are going to be Hispanic, and that's not just in Arizona. That's in a number of states around the country. So the national PTA is making this effort. I think it's a good one.

>> José Cárdenas:
How do you do this? Hispanic parents like parents everywhere are struggling with making ends meet. Many of them are working two jobs, what's the reality of the situation? What can be done?

>> Eugene Garcia:
Start early. Kids, elementary schools, we have two good examples here in some of the districts where Villa Del Sol, others have parent centers where parents can come in, be greeted, be acknowledged in their own language, can talk to teachers, so you start early. You get them involved. We have a dropoff naturally at high school. How many parents go to the Indian School very few, a family center at the high school. So the school, for instance in Yuma does a real good job. 98 -- I'm sorry, 89% of kids going to that school graduate from that high school. Almost all of them Hispanic.

>> José Cárdenas:
Dr. Garcia, thank you for joining us on "Horizonte" and sharing the results of the conference. We appreciate it.

>> José Cárdenas:
As mortgage rates remain low, you may be thinking of buying, improving or refinancing your home, but beware of predators. Some consumers are hit specially hard by predatory lenders. Michael Grant spoke with the Arizona Attorney General, Terry Goddard, recently about the problem.

>> Michael Grant:
Give me a horror story that will illustrate the contrast between predatory lending and just lending?

>> Terry Goddard:
That's an important point. Most loans out on the market today, the kind of refinancing you're talking about does not involve predatory activity, but there are some actors in Arizona, unfortunately, and around the country, who make a loan that is designed to be essentially unrepayable, the exact opposite of what you normally find at a bank. And I got alerted to this when I was working for the U.S. Department of Housing and Urban Development. Somebody gave me a closing statement that was sent anonymously to our office. Somebody thought this was horrible. And I read with real disgust a Hispanic female, with two children, owned her own home, went into refinance it and based upon this closing statement, what she ended up with at the end of the day was twice as much debt on her house, and essentially a balloon payment in about three years, which she would never be able to on her income, she would never be able to pay it off. So what this lender had done to her was essentially put her in twice as bad a position, and she got no material benefit for it.

>> Michael Grant:
She was just looking for the rather immediate reduced payment?

>> Terry Goddard:
I didn't get a chance to talk to this lady, but I'm quite sure the original impetus was to respond to an advertisement which says take the equity out of your home, pay off bills, get out from under some short term debt. So she obviously took some short term financing that she needed to make. She perhaps got $1,000, $2,000 out of the deal but she lost $25,000 in equity at the end of the day. It was a terrible deal for her and she probably is going to lose her house.

>> Michael Grant:
How did that company almost double her debt?

>> Terry Goddard:
Every bell and whistle and unfortunately this is what we see altogether too often in the situation. In the first place, this lady only spoke Spanish. So they obviously made promises to her which were not reflected in the actual documents which she signed. So there is fraud right there. But in addition, they added every fee that you can imagine. There was maximum points, there were a variety of fees to the lender, which were not justified. She had good credit. This wasn 't a situation of somebody who had very poor credit and they could barely get a loan under any something circumstances. This woman owned her house and had equity in the house. She was just in a short-term problem and ended up getting a long-term headache.

>> Michael Grant:
So they are adding 7 or 8 points?

>> Terry Goddard:
Oh, easily 7 points, single life insurance on the loan was add, single premium life insurance, all of which was rolled into the total loan amount, so that she probably didn't even notice if she didn't look very carefully at her documents that she now had a much worse situation than she had started with. She would have been much better off with a credit card debt rolling for a while and paying it off as best she could and not adding it to her mortgage. We find this a lot in parts of town, especially where people are not financially sophisticated. These predatory lenders grab hold of somebody, they make a lot of promises but those promises are not reflected in the documents that are actually signed.

>> Michael Grant:
You were telling me another story about people going around selling air conditioners for houses and these kinds of practices also being involved in that.

>> Terry Goddard:
Yes, we just finished a case which was against a company that had targeted Spanish speakers in south Phoenix. They had gone door-to-door selling air conditioning and taking a lien on their house as a result of the financing. We were able to in court to prove that this was a violation of the Consumer Fraud Act, substantial penalties. In fact a total of $31 million in penalties against -- because of 1200 victims that we were able to find. And also a violation of our civil rights act. But the real problem, I think, we were able to continue with the Attorney General's Office taking these one at a time, but what's really needed is some standards to be set for the state of Arizona by the legislature, and I hope that they'll be -- I hope there'll be legislation in the next session to prohibit predatory loans.

>> Michael Grant:
You mentioned some racial profiling involved in this. Are there other high risk particularly high risk groups to these kind of --

>> Terry Goddard:
Unfortunately it seems to be many different groups have been targeted and successfully so. I just had a couple that I saw their case. They were both college educated. New in the job market. They had less than perfect credit as the ads often say, but nowhere near as bad as they were treated by a particular lender, and most lenders are highly legitimate, do a great job and in fact, this is a black eye on the whole industry that there are a few people out there that are behaving in a highly predatory manner.

>> Michael Grant: What are the signs, if I'm looking -- how do I sort out whether or not I'm dealing with someone that's okay and not so?

>> Terry Goddard:
I would think (A), if you've got good credit, then obviously shop around for loans and for all consumers, that's number one. If something stands out, it's going to be because one company piles on all of the fees and another one doesn't. Now, many people that we're dealing with primarily who end up being victims don't know that they can shop around, don't understand that there is a competitive market for loans, and end up being basically persuaded by good salesmen that they just have to sign at the bottom line and their troubles will go away. Of course, when they sign, their troubles are just beginning.

>> Michael Grant:
Now, there's obviously a lot of federal laws on required disclosures, you know, those kinds of things. Is this a function of people not reading their paperwork or are these people actively violating those laws, not making the disclosures they are supposed to or what?

>> Terry Goddard:
Well sometimes it's that. We unfortunately, you get a packet at your loan closing that's pretty thick.

>> Michael Grant:
True.

>> Terry Goddard:
And a knowledgeable reading of that. That's why we believe credit counseling is so important. If people don't know exactly what they are doing, I certainly encourage them to become smarter consumers and to talk to some of the excellent credit counseling services. They are nonprofit. They are out on the market today and they are available for individuals who have questions about the home loan. But usually unfortunately, people ask the lending officer, and of course they get the answer that the company or that individual wants to give them. And often it's not in their best interest.

>> Michael Grant:
If you catch the problem pretty quickly, do you have some rescission rights?

>> Terry Goddard:
Yes, there are, but these usually don't get caught until the person is well into the loan or they are facing a balloon payment that they didn't know they were going to have to pay. The gotcha part of this usually comes after a few years, and so it's difficult to live within -- you're not within the rescission time at that point. And the real problem is we don't have a bar in Arizona. We don't have a standard. The federal rules that you are referring to exist today, truth in lending and so on, and we're still getting predatory problems. Like North Carolina and New Mexico and a number of other states who have passed local anti-predatory lending statutes, I think Arizona needs to join that fraternity.

>> José Cárdenas:
If you want to learn more about predatory lending, go to the Arizona Attorney General's web site. That's our show for tonight. I hope you enjoyed it. Please join us next week for more in-depth coverage of issues affecting the Latino community. Thank you and enjoy your evening.

Terry Goddard:Arizona Attorney General;

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