Des Moines Register exclusive: Wells Fargo Home Mortgage plans to announce a new goal Tuesday to lend $125 billion, or about 500,000 mortgages, to Hispanic households during the next decade.
Wells Fargo Home Mortgage is announcing an ambitious plan to loan $125 billion to as many as 500,000 Hispanic homebuyers over the next 10 years — capitalizing on a growing and underserved segment of the U.S. market.
The West Des Moines-based lender is scheduled to announce the initiative Tuesday, the first day of Hispanic Heritage Month, at an event in Des Moines.
Company officials say it will support the Hispanic Wealth Project, an initiative launched this spring by the National Association of Hispanic Real Estate Professionals that aims to triple Hispanic household wealth over the next decade by focusing on homeownership, small-business survival and personal savings.
For mortgage lenders, the Hispanic community presents an opportunity for growth.Census projections predict the Hispanic population in the United States will more than double by 2060. But Hispanic households continue to face lower homeownership rates than their neighbors.
In the fourth quarter of 2014, 45 percent of Hispanic households owned their home, compared with 72 percent of white households and 64 percent of all U.S. households,according to the Census Bureau.
“This is a great business opportunity for Wells Fargo, as well as the right thing to do,” Brad Blackwell, head of portfolio lending for Wells Fargo Home Mortgage, said in an exclusive interview with The Des Moines Register.
Joe Enriquez Henry, a Des Moines-area Realtor with Coldwell Banker MidAmerica Group and a national vice president with the League of United Latin American Citizens, said he hopes Wells Fargo works to improve access to mortgages for citizens and non-citizens alike.
Serving immigrant communities is vital in places such as Iowa, because most of the state’s growth in recent years has come from immigrants, he said.
Access to credit is the biggest barrier preventing many Hispanic households from buying a home, said Gary Acosta, CEO of the National Association of Hispanic Real Estate Professionals, a trade group representing 20,000 Hispanic real estate agents, lenders and brokers.
Many Hispanic households have little credit because they avoid debt and don’t use credit cards. Others are tripped up by lending restrictions that prevent extended family members from pooling their money for a down payment, Acosta said.
“I think most people in the industry think the pendulum has swung too far (toward tighter lending) and a lot of people who should qualify for mortgages are not right now,” he said.
Acosta said Wells Fargo’s pledge, paired with a new initiative from federal mortgage-backer Fannie Mae called HomeReady, is a “big step” in the right direction.
HomeReady allows grandparents or other extended family members who aren’t listed on the mortgage to contribute to a down payment. It also allows money from things such as renting a basement apartment to count toward the borrower’s income.
Wells Fargo has outlined four objectives for increasing mortgage lending to Hispanic households:
- Hiring more Hispanic mortgage consultants on its sales team.
- Increasing its presence in racially diverse communities by opening new mortgage offices, placing mortgage lenders in bank branches and improved marketing.
- Using processes and programs, such as HomeReady, that effectively serve diverse communities.
- Fostering partnerships with racially and ethnically diverse groups, such as the Hispanic real estate association.
Better communication from mortgage lenders to the Hispanic community would be a welcome change, said Betty Sandoval, a 38-year-old Des Moines resident. Sandoval is looking for a bigger home for her children and recently was approved for a mortgage.
She moved here from Mexico when she was 19 and works as an assistant for a Des Moines immigration attorney.
The questions from lenders can be overwhelming. And many immigrant families have solid income and plenty of money for a down payment, but they have little of the kind of credit history lenders traditionally measure, because they haven’t used banks or credit cards, she said.
“If (lenders) are willing to work with our community, they have to understand our background,” she said.
Henry said lenders such as Wells Fargo should keep more of their mortgages on their books, rather than packaging them in securities and selling them to federal-mortgage giants Fannie Mae and Freddie Mac, which have tight lending restrictions. That would allow lenders to get more creative with how they judge a borrower’s credit.
“It’s going beyond credit scores,” Henry said. “Have they been able to pay their medical bills? Are they a good tenant? Have they paid their rent?”
According to data from the Home Mortgage Disclosure Act compiled by the real estate firm Zillow, Hispanic households are denied 21 percent of the time for conventional mortgages and 18.7 percent of the time for Federal Housing Administration mortgages.
By comparison, white households have a denial rate of 11 percent for conventional mortgages and 13 percent for FHA Loans.
Hispanic homeowners also were among the hardest hit by the housing crash. Home values fell the most during the recession in zip codes where Hispanic individuals outnumber other ethnic groups.
In those Hispanic communities, home values fell 46 percent from the pre-recession peak, compared with 32 percent for black communities, 24 percent for white communities and 20 percent for Asian communities, according to the Zillow Home Value Index.
As part of its Hispanic Wealth Project, the Hispanic real estate association aims to increase the homeownership rate among Hispanic households to 50 percent in the next decade. Meeting that goal will mean getting mortgages for more than 3 million new Hispanic households.
“I think Wells Fargo is taking precisely the correct approach,” Acosta said. “It’s the right thing to do for a burgeoning community, but … there is also going to be a tremendous opportunity from a business standpoint.”