ORLANDO, FLA. -- Panelists at the Mortgage Bankers Association's 92nd Annual Convention & Expo 2005 held here last week gave much focus on the issue of underserved market lending as minority populations present growth opportunities for mortgage lenders. These ethnic groups will be making up a considerable percentage of the future housing market, stated participants at the Emerging Markets Lending: Best Practices and Challenges panel.
For instance, a presentation by PricewaterhouseCoopers Senior Associate Roberto Hernandez called Hispanic Americans "the most important piece of opportunity" in the next one or two decades. Hernandez cited data stating that there are now 37.4 million Hispanics living in the U.S., making them the largest minority group in the nation, representing 13.3% of the population. As of 2004, Hispanics had an estimated $686 billion of buying power, which is projected to grow to $1 trillion by 2010, making it a longer-term investment opportunity.
Hernandez raised points on how to reach the Hispanic population that other panelists applied to other emerging markets as well, including the fact that there is no single Hispanic target audience. Speaking to segmenting the Hispanic and immigrant market, mortgage lenders should identify unique needs within these groups and the different barriers to homeownership.
Alternative credit history check is another way of catering to Hispanic Americans and borrowers in underserved markets in general. Hernandez mentioned the use of expanded FICO scores and the use of ITIN numbers -akin to a social security number for tax purposes but without benefits and without reference to an individual's immigration status. Jorge Caceres, director of emerging markets at Genworth Financial, stated that his company engages in ITIN lending, and emphasized the need for developing products that will remove barriers to home ownership.
In his presentation, Caceres enumerated the different needs and barriers to home ownership facing the immigrant population, including financial illiteracy, providing home ownership education and addressing the lack of assets and money for a down payment. He said that established immigrants have lowered these barriers, noting that this group makes up the lion's share of the potential market at 85%, representing a significant growth opportunity for lenders.
Panelists also emphasized the need for education. Chuck Bishop, vice president in emerging markets at Wells Fargo Home Mortgage, said that in the African American community for instance, there is still the attitude of I want to be a homeowner, but I'm not sure I can.' Bishop said that there is often confusion around credit and down payment requirements. With a lack of comfort in the banking system, one way to reach these markets is by working with trusted advisors who may not necessarily be anyone related to the mortgage industry but other individuals these borrowers look up to such as inner city counselors or church groups, said Dain Ehring, CEO of Dorado Corp.
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