Speakers at NAHREP conference explain the knowledge gaps

This week, Hispanic lenders and those seeking to lend within Hispanic communities gathered together at the nation’s capital to hear about the latest trends from the National Association of Hispanic Real Estate Professionals.

At the 2017 NAHREP Housing Policy and Hispanic Lending Conference, experts explained some of the differences that come with lending to the Hispanic community.

“Files can be a bit more paper-heavy as the way Latinos bank and track finances, as well as the cultural family structure, are very different, which leads to a high percentage of manual underwriting,” New American Funding President Patricia Arvielo said in an interview with HousingWire.

In fact, NAHREP held an entire session Tuesday on lending to this highly credit-invisible population.

Arvielo explained differences caused by Hispanics living with several generations in the same household.

“In many instances, you will see cross generational loans as children and parents are in the same household,” she said. “Another big difference is the type of loans they will need as the properties they will purchase would need to house two families from different generations, parents and children.”

And it is these very cultural differences that make the demographic harder to lend to.

“Understanding the cultural differences is imperative for the success of lenders,” Arvielo said. “Identifying the pain points of this segment and providing solutions through products that fit their needs is the first step to increase homeownership in America.”

Another panelist also agreed, telling HousingWire that every demographic has its own cultural norms lenders must navigate.

“There may be cultural norms or even approaches to homeownership that may be more prevalent in one demographic than in others,” said Cerita Battles, Wells Fargo senior vice president of retail diverse segments.

“It’s important for lenders to meet customers where they are in the lending process and help them advance past barriers that might be keeping them from homeownership,” Battles said. “In a Wells Fargo survey conducted last year we found that there is a great desire among Hispanics to be homeowners and that more of this demographic than the general population plans to purchase a home in the next two years.”

Other experts explained that some homebuyers need more education on the options available to them. Many Hispanics are credit invisible and have a need for alternative methods to qualify them for a loan.

“Many homebuyers believe that low- to moderate-income borrowers who have nontraditional credit histories and haven’t accumulated a significant down payment will not qualify for a mortgage,” said Mitch Gibson, Bank of America senior vice president and strategic relationship manager.

“Lenders can help bust this myth and overcome this barrier by understanding their clients’ specific needs and designing a home-buying plan that is suitable for their situation, connecting them to down payment assistance programs and mortgage solutions that will help them purchase a home they can comfortably afford,” Gibson told HousingWire.

And there are mortgage options available to those without a traditional FICO score. Thursday, Freddie Mac announced its new automated option for homebuyers without a credit score.

Understanding the needs of Hispanics isn’t just necessary for lenders wishing to serve that community, Arvielo explained. In fact, Hispanics are becoming a larger force in the housing market, and their market share will only continue to grow.

“As lenders we must understand that by 2020, 60% of new homeowners in America will be Latinos and use this opportunity to educate our potential consumer of the resources available to them,” she said. “In addition, to understand their struggle, we must be in their communities, our leadership should reflect those we serve and intend to serve. Staying stagnant would be detrimental to our industry and irresponsible.”

In one of the first sessions of the day, a speaker explained, “10 years ago we were here because we had to be, now we are here because we won’t survive as a company if we don’t.”

There are many cultural differences the industry must overcome to serve Hispanic communities. When asked if lenders needed to be Hispanic to serve that community, NAHREP co-founder and CEO Garry Acosta explained, “You don’t have to be seven feet tall to be in the NBA, but it sure helps.” He explained that relationships with Hispanic lenders could be the key to understanding and reaching that community.