Longtime real estate broker Rolando Borja saw the foreclosure crisis coming. His clients are mostly Spanish-speaking, and he said that community is especially vulnerable to predatory lending because most business relies on word of mouth.
"They told their cousin and their friend and their compadre and this and that, not realizing that the deal they just made was a bad one. And you know," he said, "they told ten people and those ten people told another ten, so we are talking about it was like a disease. It started spreading and it happened like that."
Largely fueled by adjustable rate subprime loans, foreclosures increased dramatically nationwide, rising by 75 percent between 2006 and 2007.
In Minnesota, defaults spiked by about 82 percent.
Experts say one reason for the increase is that subprime loans were heavily marketed to vulnerable groups.
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Brokers canvassed churches, schools, advertised in Spanish-language media and went door to door. As a result, Borja said, lots of people took out risky loans they didn't understand to buy homes they couldn't afford.
"All these funky programs started coming out on the market," he said. "Pretty much anybody could buy a home,"
The University of Minnesota is the first to study the ethnicity of people caught up in the foreclosure crisis. The study linked two years' of data from Minneapolis sheriff's sales with public schools enrollment data, which tracks ethnicity and language spoken at home.
The data, from June 2006 to July 2008, paints a grim picture of the early stages of the current housing crisis. By far, more African-Americans and Hispanics lost their homes than any other groups. Most of the foreclosures were rental properties. That's already widely understood.
But here's what surprised the study authors: among homeowners, the foreign born lost their homes at a much higher rate - and the majority were Spanish-speaking.
"There is not a part of the city that's unaffected; there is not a part of the city where you didn't see foreclosed properties that had a foreign-born family living in them," said University of Minnesota Professor Ryan Allen, who authored the study.
Ryan said that while the numbers were surprising, they are nonetheless pretty easy to explain. Immigrants are thought to be vulnerable to predatory lending because of language barriers.
People who are foreign-born may also be less familiar with mortgages. In Latin America for example, buying a home usually means putting down all the money up front and buying the land where you want to build.
Another reason has to do with lending disparities. Studies have documented that minorities are more likely to borrow adjustable rate mortgages because they are more often turned down for prime loans.
The result of all this subprime borrowing is clear. Calls are up dramatically at foreclosure prevention groups that serve the Spanish-speaking community.
One of the largest, the Neighborhood Development Alliance, got fewer than 100 foreclosure calls in all of 2007. Since January this year, they've already gotten at least 1,200 calls from people seeking help.
Associate Director Maritza Mariani said almost all of their clients used a mortgage broker who sold them loans they didn't fully understand.
"People who are saying, 'Yes, you can get into a home,' and it's homebuyers who don't have enough information to make an educated decision as to whether or not homeownership is the right thing for them," she said. Mariani said more first-time homebuyer education will help prevent another wave of foreclosures.
The University of Minnesota's Allen said foreclosures are already having a major impact on Minneapolis' immigrant community. As families lose their homes and move away, the social fabric of the community is also lost.
"If they have an emergency, they know a particular neighbor can come and watch their kids. Or, it's a silly example but who you can borrow an egg from or a cup of sugar," he said. "These are the kinds of things that particularly low and moderate income households use on a daily basis to help them get by."
Allen said it's too soon to know what effect losing that support network could have over the long term on the children forced out of foreclosed homes. In the meantime, he is advising officials on ways to promote financial literacy and foreclosure prevention among the city's immigrants.