February, 1998

Access To The Dream:
Mortgage Lending in Texas

Written by the Consumers Union Southwest Regional Office.
on behalf of the Texas Community Reinvestment Coalition

Juan and Christina Valadez had long desired to escape Austin's high rental market and move into Guadalupe Neighborhood in Austin, where they attend church. With the help of friends, they designed a home within their budget and began preparing to build it on a lot where a drug house once stood.

The Valadez' applied for a mortgage loan in April 1996 with Texas Commerce Bank on the recommendation of friends. Within two months, Juan and Christina were approved. In June 1996, the Valadez's learned from Texas Commerce Bank that their paperwork had been lost and that they would need to reapply.

"I had to start from scratch," explained Mr. Valadez. "It was as if the bank never knew I came in."

In the meantime, Juan temporarily left his job at Farm Credit Bank to accept a two-year position as youth coordinator with the Guadalupe Catholic Church, fulfilling his spiritual commitments. Christina continued to work at Texas Education Agency (TEA). Juan and Christina reapplied, but "the bank became real suspicious" about the significant decrease in Juan's salary. According to the couple, however, they were still a very good risk considering savings and investments.

"I could see [the bank saying] 'well you took a big paycut', but.my wife didn't take a pay cut.With the amount of money that my wife and I make still, [even] after taking this job [at the church],.by all standards we should have been able to qualify for the amount we were going to spend on this house," said Mr. Valadez. "I had to write a letter to explain why I left a good-paying job to take this one and they also needed a letter from my former employer saying that after a period of two years.that they would be willing to hire me back at the same salary or higher. I also had to prove to them that I would continue to do contract work for them [former employer] to keep my level of pay at the same rate it was before I left them..I was spending about 50 hours a week at the church and thirty hours a month at the bank."

Juan and Christina were re-approved, but only for a construction loan until October 1996. Due to the delay in processing the construction loan, the Valadez's did not start building until September 1996 and had to pay for a six-month extension on the loan. They reapplied for the mortgage loan. The bank invalidated the first appraisal, which valued the home at $140,000, because the suveyor was no longer on the bank's approved list. "The second survey brought the value of my house down considerably [because].samples were taken from totally different sections of Austin [which] didn't match my area."

The Valadez's finished their home in April 1997 and spent close to 23% of the home's original value in down-payment and closing costs and other fees.