We believe several factors explain the Hispanic Homeownership Gap. A lot more can be done to lead the mortgage industry into considering Hispanic customer needs. The following constitute examples of how the industry is not meeting the needs of the Hispanic borrower:

Hispanics needs are very different from the needs of the average US consumer. Their own experiences in their home countries attest to that: experiences with devaluations, high inflation, debt defaults, confiscation of deposits, and widespread unavailability of credit lead to a general distrust for financial institutions. Immersing this population in the US mainstream credit market is like trying to push a young kid through college bypassing high school. On top of this, there are clear language barriers. The financial industry has not made the necessary investments to address this need; it may have made sense when Hispanics were less than 10% of the population, it is time to act.
 
Participation within the financial system is essential for building a credit history and having a credit history provides easier access to mortgages. Getting a credit card or a car loan is very normal behavior for most Americans today; most Americans start building a credit history from a very young age. Unfortunately some large segments of the Hispanic population do not follow the same path, particularly first and second generation Hispanics. Cultural and historical reasons makes them feel uneasy about debt. This dichotomy places successful and otherwise creditworthy Hispanics in the US at a disadvantage. However, they do participate in a number of other credit-like financial relationships that could be measured to assess true creditworthiness for the Hispanic borrower. (See illustration below)
 
Another hurdle for Hispanics is their reliance on multiple earners, multiple jobs, and their reliance on the cash economy, defining factors which differ from the general population. The general population does not have these characteristics and systems and programs have been built without the Hispanic needs in mind. The inability of traditional systems to measure multiple earners, jobs, and cash income and the disproportionate reliance of Hispanics on these attributes lead to an underestimation of the ability to pay for the Hispanic borrower.
 
Mortgage lending and the extension of credit to borrowers in the US is supported, to a large extent, by the development of liquid and efficient secondary markets for mortgage loans, which multiplied the capital available and diversified the risk involved in mortgage lending operations in the US. Secondary markets rely on the creation of standardized guidelines that allow investors to measure and assess risk for loan pools that aggregate thousands of borrowers, without knowing the specifics about each particular borrower. The specifics about Hispanic loans discussed before haven’t allowed the widespread use of standardized underwriting guidelines for Hispanic segments, which at the same time has not allowed for the creation of liquid and efficient secondary markets that create mortgage opportunities for Hispanic borrowers.
 



 

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