For Hispanic lending, cultural and generational barriers are a big hindrance to effective lending, but more importantly, these are issues that need to be understood.
“Files can be a bit more paper-heavy as the way Latinos bank and track finances, as well as the cultural family structure, are very different, which leads to a high percentage of manual underwriting,” New American Funding President Patricia Arvielo told HousingWire
. “Another big difference is the type of loans they will need as the properties they will purchase would need to house two families from different generations, parents and children.”
NAHREP President Joseph Nery pointed out another problem for Hispanic lending – credit-invisible buyers.
“Hispanics who are first-time homebuyers tend to have common barriers interfering with their ability to more readily purchase a home,” Nery told HousingWire. “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.”
In three years’ time, 60% of new homeowners will be Latinos, Arvielo said. NAHREP also reported that 46% of Hispanics were homeowners in 2016, up from 45.6% in 2015 and the only ethnic demographic to show an increase in the year.
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There are many barriers that hinder successful lending to minority borrowers, and understanding them is imperative to cross boundaries, according to experts attending the National Association of Hispanic Real Estate Professionals’’ Housing Policy and Hispanic Lending Conference.