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Knowledge is power for helping Hispanics

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Posted Aug 3 2008, 10:59

Understanding Cultural Differences

Knowledge is power for helping Hispanics achieve the American Dream.

By Tony Cohen-Enriquez

In what can be seen as a growing trend, George Porras with Remax Master in Covina gets 90% of his business from Hispanic homebuyers. The reason is clear. Hispanics are buying homes in record numbers.

According to the U.S. Department of Housing and Urban Development, Hispanic homeownership reached a record 49.5% in 2005, and two million more Hispanics are expected to buy homes in the next four years, according to data from the Toms Rivera Policy Institute at the University of Southern California. The buying power of our nation's Hispanics population is estimated at whopping $738 billion and expected to rise to $1 trillion by 2010. "Whether you are selling Pampers, credit cards, or building homes, this market will become the economic engine of our country," according to Chiqui Cartagena, a leading U.S. expert on the Hispanic market.

Realtors can capitalize on the red-hot potential of this market segment by working with residential mortgage lenders who understand the cultural nuances and economic differences that make home buying more difficult for Hispanics. According to a recent HUD research project, these barriers include a lack of information about the home buying or mortgage lending process as well as barriers in the housing and mortgage markets.

A growing number of lenders today are working to remove some of the obstacles from the traditional mortgage lending process. The language barrier is easily overcome with Spanish-language advertising and the hiring of bilingual loan officers. More difficult are the cultural barriers that Hispanics face when trying to purchase a home.

The Mortgage Bankers Association believes that Hispanic borrowers often steer clear of mainstream lenders due to deportation fears and their dependence on cash transactions. Hispanics typically lack the traditional types of credit required for most conventional financing, including low credit scores because many have not been in the U.S. long enough to develop a credit history. In addition, Hispanics often do not have a legitimate Social Security number needed to pull a credit history and establish residency. Unfortunately, because of these challenges Hispanics tend to be more susceptible to predatory lenders.

American Home Mortgage has created a nationwide emerging markets division that addresses these mortgage lending issues and provides financing to documented and undocumented tax-paying immigrant borrowers with non-traditional credit. Its strategies include adding bilingual loan officers and creating alternative credit-scoring systems that take into account rent, utility bills, child care expenses and medical payments. In addition, the company accepts family gifts and the use of co-signers.

American Home Mortgage also works with Wall Street investors and the insurance market to continually identify new types of mortgage products that meet the unique needs of Hispanics. Examples include residential Alt-A programs that don't require income verification, loans available to Hispanic homebuyers with Individual Taxpayer Identification Numbers (ITIN) and programs that permit 100% financing.

Originators and Realtors also can benefit from making education part of their emerging market programs. Hispanics need to understand how home buying works in the U.S., especially the first generation of Hispanic immigrants who tend to be very apprehensive about the process. HUD recommends programs such as homebuyer education counseling, financial literacy classes, housing search assistance, guidance through the closing process and post-purchase counseling.

American Home Mortgage leverages the popularity of Hispanic radio programs to provide information about how to buy a home in America. The company also gets 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.

The company also focuses on educating the Realtor community about the home-buying power of Hispanics and the characteristics of this emerging market. For instance, Hispanic women play the more dominant role in decisions that relate to the home. American Home Mortgage also works to introduce its Hispanic borrowers to Realtors and serves as a liaison throughout the home-buying process, translating when necessary and making sure both parties know what the other expects.

Realtors are uniquely suited to help Hispanic immigrants achieve the American dream of homeownership. The right mortgage lender can help educate both the Realtor and Hispanic homebuyer to make the dream a reality.
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Tony Cohen-Enriquez is president of emerging markets for American Home Mortgage, one of the nation's fastest growing independently owned direct mortgage lenders. The company works directly with Wall Street investors to design residential mortgage products that are unique to the industry. Licensed in 50 states and employing more than 5,100 people, American Home Mortgage closed more than $9.5 billion in residential mortgage loans in 2005, 11% of which came from its emerging markets division. Tony CE can be reached at: [email protected]

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