According to the State of Hispanic Ownership Report, some 8.3 million Latinos under age 45 are now “mortgage ready.” But that’s not to say they don’t face considerable barriers to ownership. One, obviously, is a lack of affordable houses. But that’s something faced by all-ilk of would-be buyers, not just Hispanics.
Facile Finances
But because they are younger, they tend to have lower incomes and less wealth. Because they are “over-represented” in the service industry, they have the highest rate of unemployment thanks to the pandemic. And even when working, they have the greatest pay discrepancy, earning just 55 cents for every dollar paid to White males.
Their credit scores tend to be lower as well – a median of 668, according to the State of Hispanic Ownership Report – and their all-important debt-to-income ratio is a median 41 percent. Also, they tend to put down as little of their own money as possible, a median of 3.5 percent. Consequently, they are “particularly vulnerable to underwriting changes.”
(By the way, Latinos are not necessarily a homogeneous group. They come from 20 different Latin America countries and from different races, socioeconomic and migration backgrounds. Guatemalans, Dominicans and Hondurans have an ownership rate of just 32 percent, for example, while the rate among Afro-Latinos is 47.5 percent.)
These trends and issues mentioned have not been lost, not on big banks or mortgage companies. “We need to focus even more” on the Hispanic market, Kristy Fercho, executive vice president of home lending at Wells Fargo, told NAHREP at its recent annual conference. “We really have to get diligent.” And Mark O’Donovan, CEO of home lending at JPMorgan Chase, agreed.
“It’s imperative that we focus” on the Latino segment of the market,” he told the group. “It’s not just the right thing to do. It’s a chance to grow as a business.”
Bigs Step Up
Chase, Wells and many other national banks have made major commitments to further minority ownership. Chase, for example, has promised $30 billion over the next five years to, among other things, originate an additional 40,000 home purchase loans for Black and Latino households, help an additional 20,000 households refinance into less expensive loans, and open 100 branches in underserved areas.
Bank of America is investing $60 million – $30 million in loans and $30 million in equity financing – to support Enterprise Community Partner’s five-year initiative to help facilitate racial equality in housing. The investment will increase access to capital and career opportunities for BIPOC (Black, Indigenous and People of Color) leaders developing multi-family, affordable and supportive housing across the country.
Still, independent mortgage bankers and brokers may hold the key to unlocking the Hispanic market, and not just because they often are willing to take a little more risk. Bankers and brokers can take on the “trusted advisor role” many Latinos are looking for.
“That’s more important to Hispanics and that’s what we’re good at,” James Hecht, executive vice president for retail lending at Caliber Home Loans, told another session at the NAHREP meeting.