Financing homeownership for emerging markets: Helping immigrants achieve the American dreamMariano ClaudioHispanic homebuying, emerging markets, targeted marketing
Much has been written in the past year about the emergence of
Hispanics and other minority groups on the home-buying market.
These reports are old news. Hispanics have arrived, and at 42.7
million nationwide, present great opportunities for mortgage
lenders who understand and can adapt to the cultural and economic
differences that impact the home-buying process.
The numbers are impressive. The U.S. Department of Housing and Urban
Development reports 50 percent of Hispanics already own their
own homes - a record high. Looking to the near future, Hispanics
are expected to comprise 40 percent of the nation's first-time
homebuyers by 2012, according to the National Association of Hispanic Real
Estate Professionals. In hard numbers, 2.2 million Hispanic
households will buy homes between now and 2010, based on data from
the Tomás Rivera Policy Institute at the University of
Southern California. Further indication of Hispanic buying clout
comes from predictions made by the University of Georgia's Selig
Center for Economic Growth, stating that Hispanics' disposable
income will exceed $1.08 trillion by 2010.
Seize la día
Leaders in the residential mortgage industry are laser-focused on
the potential of this home-buying segment and advocating new
lending methods to address the language and cultural barriers
Hispanics face when trying to purchase a home. For example, the Mortgage Bankers Association of
America believes that automated underwriting systems do not
take into consideration the needs of Hispanic borrowers who often
steer clear of mainstream lenders due to deportation fears and
their dependence on cash transactions.
The traditional mortgage lending process is burdened by numerous
hurdles when it comes to servicing emerging market home buyers.
Hispanics typically lack the customary types of credit required for
most conventional financing. This includes low credit scores,
because many Hispanics have not been in the United States long
enough to develop a credit history. Often, Hispanics do not have
legitimate Social Security numbers with which to pull a credit
history and establish residency. Unfortunately, because of these
challenges, Hispanics tend to be more susceptible to predatory
lenders.
Knowledge is power
Education plays an important role in the development of residential
mortgage lending programs for emerging markets. Hispanics need to
understand how home buying works in the United States, especially
the first generation, which tends to be very apprehensive about the
process.
Companies seeking to reach this emerging market segment can
leverage the popularity of Hispanic radio programs to provide
information about how to buy a home in America. They can also
become involved in Hispanic community events at the local level,
not only to educate, but also to create the kind of personal
connection that this culture values in its business
relationships.
A company may also focus on educating the real estate community
about the home-buying power of Hispanics and the characteristics of
this emerging market, for instance, sharing the information that
Hispanic women play the more dominant role in decisions that relate
to the home. A company could also work to introduce its Hispanic
borrowers to real estate agents and serve as a liaison throughout
the home-buying process, translating when necessary and making sure
both parties know what the other expects.
Conclusion
The Hispanic market is on the threshold of becoming an economic
powerhouse in the United States, with buying clout that is expected
to reach $1 trillion in the next four years. Mortgage lenders who
want to benefit from the home-buying potential of this emerging
market need to develop lending programs that can help Hispanics
achieve the American dream.
Mariano Claudio is vice president of emerging markets for Pinnacle Financial
Corporation, an independently owned direct mortgage lender. He
can be reached at (703) 738-9380 or e-mail
[email protected].
