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The future of demand: Trendsetters to watch (Part III)

National Mortgage Professional
Mar 24, 2014

The future of demand: Trendsetters to watch (Part III)Joe AmorosoHispanics, bilingual approach, marketing

Reaching out to the Hispanic homebuyer
"The Latino market may not be for everybody - just those who want to be in business in five years." I recently came across this quote made by Gary Acosta, the immediate past chairman and co founder of the National Association of Hispanic Real Estate Professionals (NAHREP). It certainly grabbed my attention.

In my three part series on the future of demand, I've examined the home buying trends and economic impact of baby boomers and echo boomers, and single women. For the final installment, I'm putting the spotlight on one of the biggest areas of potential growth for the mortgage industry, namely, the Hispanic market.

According to the U.S. Census Bureau, there are more than 37 million Hispanics in the country (roughly 13 percent of the population) and they represent the fastest growing minority. Hispanic households are projected to account for approximately one third of the 26 million increase in households until 2020.

Since this demographic is also young - 50 percent of Latinos are under the age of 25 and 70 percent are under the age of 36 - there is great opportunity to reach out to these potential customers.

Over the next 20 years, this group is expected to have the biggest surge in buying power. From 1990 to 2000, the number of Hispanic households with an annual income of $100,000 or more rose 137 percent. Let that sink in.

If you don't already have a marketing strategy in place targeting Hispanic buyers, now is the time to assess whether or not it makes sense for you to position yourself over the long run. By developing and investing in a strategic, bilingual approach that speaks to the needs and preferences of Latino homebuyers, you may be able to tap into an enormous potential to originate more loans.

Become an educational resource
One of the best and simplest ways to engage Hispanic buyers is to provide culturally sensitive and practical information.

NAHREP estimates that over the next six years, 40 percent of first time homebuyers will be Hispanic. Like all first time buyers, they are new to the entire mortgage process, which can be highly intimidating. Become an educational ally. Help your customers navigate the process and understand the steps and jargon involved in financing a mortgage.

Take advantage of existing programs and resources. For example, CreditSmart Español is a nationwide, bilingual, instructor led consumer credit education curriculum in which free workshops are offered with flexible schedules. Research classes in your local area and help get the word out through your marketing efforts or by collaborating with local Hispanic agencies or organizations.

In addition, PMI Mortgage Insurance Company now offers its online pre purchase homebuyer education classes in Spanish via phone or online. Brokers can enroll prospective borrowers by visiting their Web site.

Programs like these can be ideal for a broad range of Hispanic consumers looking to obtain the knowledge and skills necessary to effectively manage their money and credit, and to understand the ins and outs of homeownership. By enhancing the financial literacy of all homebuyers - Hispanics included - you can boost their comfort level and ultimately earn their business.

Establish trust
Part of establishing trust is the educational component outlined above. But many Hispanics tend not to trust financial institutions and avoid debt. One of the most effective ways to establish trust within the Latino community is to have loan officers who speak the language. It's especially critical if you do business in Florida, Texas, California, Arizona or New York. A whopping 75 percent of all Latinos inhabiting in the United States live in these five states.

Cultural cues are also important beyond language barriers. Train your staff to reduce the formalities and become more personally involved. Make sure that they take the time to verbally explain the steps involved in the mortgage process.

Since family tends to be emphasized and highly valued in Hispanic culture, consider offering customer service perks that go beyond the norm. Set up a small play area for children, introduce your entire staff or even provide free local phone service in your office. Small things like these hold weight, generate referrals and can distinguish you from your competitors.

Credit score and loan approval flexibility
Another barrier many Latinos face when applying for a loan is a lack of down payment history or funds coupled with a lack of traditional credit history. These are two critical factors that arise when examining credit scores and histories for mortgage approval. To a large degree, traditional credit scoring techniques fall short when it comes to accurately portraying creditworthiness. For many Hispanics, mortgages are often family affairs with several members taking part in the loan. Multiple families may live together and pool their income to qualify.

Brokers willing to go the extra mile to get these customers approved with limited documentation stand to benefit. Since there is a large long term potential in this demographic, be flexible. Ask customers for letters demonstrating that they have been paying their bills and rent on time. Explain the process and ask the right questions to streamline the experience for them.

The right products
Misconceptions can hurt your sales. According to Fannie Mae's 2002 National Housing Survey, almost 40 percent of Latinos polled believed the myth that a 20 percent down payment on the price of a home was necessary up front.

To combat this, offer the right products that require low or no down payments, including those offered by Fannie Mae. Many customers will qualify for prime products, but to serve a wide range of customer needs, you should also become highly versed in flexible loan products, such as sub prime and alt A, no income no asset and stated income loans. Also consider conforming products including programs like MyCommunityMortgage or Flexible 97 or 100. Additionally, Fannie Mae and Freddie Mac now jointly offer 83 Spanish translations of the Fannie Mae/Freddie Mac Uniform Instruments at www.efanniemae.com. This can be a great product resource for your customers.

The Hispanic market is one that is currently underserved, but it has tremendous opportunity for growth. With its increasing economic clout and sheer numbers, you should seriously consider entering or enhancing your participation in this sector. By embracing a Latino clientele, you can build loyal customers and become the first broker of choice.

Joe Amoroso is senior vice president with Opteum Financial Services. He may be reached by e-mail at [email protected].

Published
Mar 24, 2014