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   ARTICLE   |   From Scotsman Guide Residential Edition   |   May 2007

Welcoming Hispanic Borrowers

Nuances abound in one of the mortgage industry’s fastest-growing sectors

r_2007-05_Lawrence_spotU.S. Hispanics, like other minorities, often face challenges to reaching homeownership. Although U.S. homeownership is near an all-time high — nearing 70 percent — racial and ethnic gaps have increased in the past 25 years.

For brokers, however, this can present an opportunity.

Although 75 percent of Caucasian households owned their homes in 2005, only 49.5 percent of Hispanic households owned theirs, according to Harvard University’s Joint Center for Housing Studies. Issues such as immigration status, income documentation and language barriers can create major challenges for potential Hispanic homebuyers — especially new immigrants.

There are more than 41 million Hispanics in the United States, according to the U.S. Census. They comprise about 13 percent of the total population and are the largest minority group in the country. Further, the Census predicts the Hispanic population will reach more than 102 million by 2050.

As such, many U.S. companies are recognizing the spending power of the Hispanic population by directing more marketing dollars its way. In 2005, advertisers spent an estimated $3.3 billion to reach Hispanics, a 6.8-percent increase from 2004, according to Hispanic Business Inc. Research also shows that Hispanics have almost $700 billion in annual purchasing power. In addition, this purchasing power has grown quicker than the general population in the past 10 years, and that is expected to continue.

Therefore, there is tremendous opportunity for mortgage companies to grow their businesses by tapping into this market’s spending power. By understanding the Hispanic market’s nuances and potential products, you can learn to market to it and other ethnic minorities.

Challenges in the mortgage process

For Hispanics who do not speak English well, language can be a major obstacle when seeking information about mortgage requirements. Even some Hispanics who speak English often prefer to communicate in their native language when discussing a mortgage. As such, these prospective customers must know how to find a financial institution that provides customer-service assistance in Spanish.

Prospective customers’ immigration status is the key factor when determining their mortgage options. They need access to mortgage products that include provisions for individuals who are U.S. citizens, permanent residents, Individual Tax Identification Number (ITIN) holders and foreign nationals. Many immigrants may incorrectly assume that if they do not at least have a green card, they cannot secure a mortgage.

Many Hispanic borrowers, like other minorities, also may be unfamiliar with the general requirements of a credit score or the basic documentation required for the mortgage-application process. Because some may receive their income in cash, they can be unprepared when established credit is necessary for a mortgage application.

Some Hispanics also may distrust banks and might hold more cash instead of opening a checking or savings account, which often is the first step to building credit. Providing credit references also can be difficult for prospective customers who are paid in cash, with lack of paperwork to prove their income.

Options that address concerns

The best way to address Hispanic customers’ concerns is to offer straightforward, concise information about the mortgage process.

When Hispanics are considering mortgage options, their primary concerns often include: mortgage payments; prepayment penalties; variable rates (most Hispanic are low risk-bearers); tax returns with low incomes; and losing property because of immigration status.

The following options generally are popular with Hispanic customers:

  • Nontraditional credit with no credit score: Hispanic borrowers, both non-U.S. citizens and U.S. citizens, at times do not have enough trade lines open. This often is because many prefer to pay with cash as opposed to opening credit accounts. For this reason, a flexible mortgage program that takes alternative credit is a good solution for their mortgage needs.
  • Low down payments: Even when they have enough money for a down payment, some Hispanic borrowers may prefer to save money for their business, travel, helping their families or emergencies. A mortgage solution that does not require a significant amount of money upfront is a good fit in this case.
  • ITIN loans: The Internal Revenue Service provides a tax-identification number to qualified immigrants who are ineligible for a Social Security number. Some mortgage companies allow the ITIN to be used as an identifying number for mortgage transactions in place of a Social Security number.
  • Self-employed with no income verification: In some cases, Hispanics cannot qualify for a loan with the income provided on their tax returns. This often happens because they receive income in cash that may be unreported. Customers in this category can benefit from mortgage loans that accept cash as payment and that do not require proof of income.

Marketing to the Hispanic population

A mortgage expert smoothes the mortgage process, which is the message to convey to potential borrowers. It is our responsibility to make the necessary information accessible for Hispanic consumers.

As mentioned previously, language can be a barrier. In addition to employing Spanish-speaking customer-service reps, develop marketing materials and important documents in Spanish.

Consider positioning your company as a mortgage expert in the Hispanic media with advertising and public relations. You can buy air time for advertising on Spanish radio stations, place ads in Spanish newspapers or purchase banner ads on local-news-media Web sites.

Another option is pitching story ideas to business reporters in the Spanish-language media. Introduce real estate reporters to a Spanish-speaking customer-service representative in your company.

You also can reach out to the Hispanic community by distributing marketing materials at cultural events. Your company can also host educational mortgage seminars at a Hispanic community center.

Apart from traditional marketing methods, word-of-mouth can expand your customer base within the Hispanic community. Encourage past clients to mention your name to family and friends.

Once you close a loan for Hispanic borrowers who are happy with your service, referrals await. Focus, too, on building relationships with Realtors in Hispanic communities who know buying trends.

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According to the U.S. Census, the Hispanic population is expected to be the country’s largest growing group through 2050. With strategies such as employing targeted marketing and Spanish-speaking customer-service representatives, mortgage companies can tap into the increasing spending power of this market and help more borrowers own homes.


 


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