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National Mortgage Professional
Nov 05, 2006

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]
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