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Butterfly effect on the mortgage industry

Feb 26, 2007

One size does not fit all: Understating the distinctions of the Hispanic niche marketMariano ClaudioHispanic market A comprehensive study of Hispanics in America found that by the end of the decade, Hispanics will account for nearly 14 million households, and their spending power will reach more than $670 million. "As the Hispanic market keeps growing both in size and buying power, companies in a wide variety of industries will enjoy significant marketing opportunities," according to The Conference Board, which conducted the study. (The Conference Board is the national research organization best known for producing the Consumer Confidence Index and the Leading Economic Indicators.) Mortgage brokers interested in evolving beyond their traditional customer base should consider targeting this burgeoning niche market. However, doing so successfully will require more than simply translating marketing materials into Spanish and hiring bilingual loan officers. The Hispanic market is extremely diverse, and mortgage brokers need to take the time to understand the various demographic and economic differences that exist. The Conference Board's study, The Hispanic Market in 2010, found that the Mexican community is by far the largest Hispanic group in the United States at 6.5 million households. Central and South American households number 1.6 million, representing the nations second largest Hispanic community. At 1.2 million, Puerto Rican households are the third largest Hispanic group in the United States. Finally, Cuban households represent the smallest segment of the Hispanic population at just over 511,000. From Peru to Columbia and Mexico to Puerto Rico, Hispanics are collectively a very passionate people. However, that passion - for music, food or politics - is grounded in a strong national identity. Simply applying a generic "Hispanic" label does not do justice to these rich and varied cultures. Mortgage brokers who want to target the Hispanic market need to become amateur social anthropologists to get a holistic understanding of the beliefs, values and customs of the various nationalities and cultures in your community. This requires both observation and participation. Get involved in the social activities of local Hispanic groups by sponsoring sporting and musical events that bring these communities together. These events can be great opportunities to generate leads. Make sure your translated marketing materials address any unique language idioms. In addition to the national and cultural differences, there are also generational differences to consider. For instance, a majority of first generation Hispanic immigrants do not speak English. They will be less knowledgeable about the home-buying process and need constant attention throughout the process. Ride along with them and their real estate agent to provide translation service. Stay in constant contact and keep them apprised of the progress of their loan application. Conversely, second generation Hispanics tends to be bilingual, making them more comfortable doing business in English and more confident about their home-buying decisions. Finally, it is important to have a thorough understanding of the mortgage lending limitations and options that apply to Hispanic immigrants. "The immigrant population in the U.S. presents challenges to the traditional methods of mortgage underwriting," according to the Mortgage Bankers Association of America (MBA). For instance, many Hispanics do not have established lines of credit in the United States. However, there are alternative ways to establish creditworthiness using rental and utility payments, and money transmittals, and the mortgage banking industry is working to create an automated system that can use this type of data to create credit scores. In its October 2006 issue paper, Mortgage Lending to Immigrants in the United States, the MBA reported on several other strategies to serve immigrant home buyers: - Individual Tax Identification Numbers (ITINs) issued by the U.S. Internal Revenue Service (IRS) can be used to verify a borrower's income. Since 1996, the IRS has issued more than 7.2 million ITINs. - The matricula consular, an official identification issued by Mexican embassies in the U.S., can also serve as an alternative form of identification. Pinnacle Financial works with Wall Street investors and the insurance market to identify mortgage products that meet the unique needs of Hispanics. The types of loans that have proven most successful include residential alt-A programs that don't require income verification, loans available to Hispanic homebuyers with ITINs and programs that require zero percent down (100 percent financing). There are numerous ways to tap into the $670 million Hispanic market. Mortgage brokers who take the time to gain an in-depth knowledge about this burgeoning audience will be rewarded. Mariano Claudio is executive 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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