How to navigate mortgage lending in a credit-invisible population


Credit-invisible buyers create a new set of problems for lenders – a common problem in the Hispanic community.

At the National Association of Hispanic Real Estate Professionals 2017 Housing Policy and Hispanic Lending Conference, experts talked about credit availability in an evolving market.

In fact, experts explained that many Hispanics have thin credit files or are even credit invisible, making lending to this population more difficult. In an interview with HousingWire, one panelist explained this barrier, as well as the rising costs that keep Hispanics from homeownership.

“Hispanics who are first-time homebuyers tend to have common barriers interfering with their ability to more readily purchase a home,” NAHREP President Joseph Nery said in the interview. “Today, the cost of financing is high and is influenced by various factors including regulatory considerations, expensive LLPAs that essentially double charge for the risk associated with a given loan.”

“These cost considerations are coupled with the credit scoring realities that nearly a third of Hispanics are considered credit invisible, unscorable or have thin files, making the need for implementation of alternative credit scoring models an economic imperative,” Nery said.

“The industry should also use alternative credit scoring models to increase the data sources used to evaluate borrower credit worthiness, thereby increasing homeownership opportunity for more Hispanics,” he said.

Mortgage Bankers Association CEO David Stevens explained to HousingWire that many policies only support one type of family structure, and don’t consider today’s changing demographics.

“Credit availability remains below the historical norm and current housing policies keep too many qualified lower- and middle-income families out of the housing market,” Stevens said. “Some policies, such as the QM rule, apply regulations that fit only one type of household and family structure, rather than the diverse household and family structure of today.”

“For instance, some underwriting policies don’t account for families that may have multiple incomes or those who may not have developed a traditional credit profile, and that can directly impact Hispanic families,” he said.

During the session, Andrew Bon Salle, Fannie Mae executive vice president of single family business, explained many Hispanics live with several generations, and therefore multiple incomes, under one roof, and that lenders should keep products in mind that would cater to those needs.

And educating lenders not only on what products are available but also on the culture itself is key to creating more homeownership opportunities.

“We as industry leaders should focus on ensuring we have culturally competent professionals ready and able to assist Hispanic homebuyers,” Tanya Reu-Narvaez, Realogy Franchise Group senior vice president of human resources and diversity outreach and one of the speakers in NAHREP’s second session of the day, told HousingWire.

“This will allow for much-needed education on the process and affordability and on the importance of homeownership in creating and building wealth,” Reu-Narvaez said.

During Tuesday’s session, David Lowman [pictured above on the right], Freddie Mac executive vice president of single-family business, explained that the credit box is wide enough to serve anyone who wants to be served, but that many times that box is not what is offered in the marketplace.

Nery also explained that while most mistrust for banks from the Hispanic population comes from immigrants, not U.S.-born Hispanics, more access within Hispanic communities could greatly improve the relationships financial institutions have within the Latino community.

“It’s important that financial institutions are physically present in Hispanic communities to engender trust,” Nery said. “Banks may engender more trust in the Latino community by developing Spanish language in branch materials and online resources that Spanish dominant individuals can understand and navigate.”

“Training and hiring individuals from the communities they seek to serve is another opportunity for banks to raise their trustworthiness level,” he explained.

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