It was reported this week that the US Homeownership Rate dropped to 63.4%. Among Hispanics it dropped from 46.1% in 2013 to 45.4% in 2014.
Why is this happening?
According to a report by the Hispanic National Mortgage Association the Hispanic Homeownership gap is “created by very specific market inefficiencies coming from the lack of Hispanic-centric understanding across the primary and secondary mortgage channels. Hispanic unique behavioral, cultural and idiosyncratic characteristics lead to differences in their credit behavior and income structures, creating barriers to homeownership.”
As an industry we need to do a better job explaining the mortgage process. This includes education on the different options for Hispanic homebuyers and making sure that they apply for the right kind of mortgage.
Zillow conducted a study that revealed that when applying for a conventional mortgage, Hispanic buyers are denied roughly 22% in comparison with white homebuyers (10%) applying for identical loans.
This is part of the reason why only 45% of Hispanics own their home, but also their credit behavior plays a role in the home purchase process.
Last May, the Consumer Financial Protection Bureau published a report entitled “Data Point: Credit Invisibles”. In which they show the numbers of consumers that are ‘credit invisible’ or have records that are unscored.
What did they say about the Hispanic credit behavior? The results by race suggest that Hispanics are more likely to be credit invisible” meaning they don’t have credit history on file with any of the major credit reporting companies.
For first and second generations Hispanics in the US, for cultural reasons, debt often makes them feel uneasy. Many have come from countries where the population didn’t trust the banking system.
The Hispanic Community needs our help understanding that they need to create a credit history in this country. Be there to help them create a plan to be ready before attempting to enter the market.