October 17, 2007
Sub-prime Mortgage Crises...

 Q. How has the sub-prime mortgage crisis affected the volume of home-buying in the Latino market?

A. The sub-prime mortgage crisis has affected the volume of home ownership tremendously.  It has affected every first time or entry level buyer.  Many of the Latino Home buyers are in this category.  When the sub-prime crisis hit, it not only took away the lenders with more relaxed underwriting guidelines, but also effectively put the possibility of homeownership just out of reach.

Q. How has the crisis affected Latino mortgage firms and housing brokers?

A. As in all crisis, many Mortgage firms are forced to cut back in order to reduce overhead, find alternative options and or lending programs for their buyers.  As for the housing brokers, the buyer pools automatically reduce due to limited financing products, high prices and the buyers’ fears.

Q. Several reports have found that Latinos have a high proportion of high-cost loans. Why do you believe this is so?

A. Anytime that there is money involved there is a tendency by some mortgage companies to cut corners, stretch the truth, if you will.  There are many individuals that get more concerned about how much they can make and don't look or care at what the consequences may be to the new homeowner.  Minorities, in many instances are not savvy enough to understand or are just not informed by the mortgage broker as to what type of loan they are obtaining.  Misinformation or lack of is a recipe for disaster.  There are plenty of predatory lenders that in order to make money (make the loan), don't explain the "fine print".  There are instances that the initial interest rate (teaser rate) was not explained as such.  The next thing the consumer experiences it a much higher interest rate that a person making 3 times their income amount couldn't afford. There were exorbitant fees charged, etc, etc.  All this unknowingly paid by the consumer. Culturally speaking, the Latino was raised with the belief that "if you don't have the cash to buy, you can't afford it".  Taking out a loan was not a concept our parents grew up with.  When there is money to be made and there isn't anyone looking or protecting the rights of people, the uninformed become the targets and the "cash cow" so to speak.

Q. At the same time, ITIN loans (made to illegal immigrants) have a much lower delinquency rate than other loans. What cultural or economic factors can explain this?

A. The majority of Latinos that come to the US come for financial reasons.  There are better opportunities to make money here in the US.  Like all Latinos that were born in the US, they understand the Tax process; they have Social Security numbers and pay their taxes for the money earned.  The illegal immigrant also understands the process.  Since the illegal immigrant can not obtain a Social Security Number, they obtain an ITIN.  The lenders that make ITIN loans take the time to explain the process, teach the whole concept of homeownership and loans, screen the applicants and make sure that they are a good risk.  Anytime that one explains the loan process, and researches the credit worthiness of the borrowers, you can have a better success rate.  As you can see the cultural and economic factors are basically the same.  It is the person presenting the product that is different.

Q. What do you expect in the Latino housing market in the next 6-12 months?

A. The bigger question is what are the government and the lenders going to do to attempt to right the ship?  The lenders are currently giving a lot of lip service.  The lenders are publicly stating that they are willing to make changes to the existing loans, work with the borrower.  Privately they are doing nothing and proceeding with the foreclosure process.  When the lenders begin readjusting, the huge amount of foreclosures will settle down, and the process of home-selling will begin its cycle anew.  In the Latino housing market, those that have the credit and the wherewithal to buy, will still be able to buy.  Until the lenders find a way to take care of problems they have or will potentially have, the mortgage business will not be able to make many new loans unless the borrower has AAA credit and high income to support the loan.

Additional comments:

While there is some ownership in the sub-prime crisis by the borrower, the majority of the fault lies with the lack of supervision of the lender and mortgage companies.  Until someone begins overseeing and controlling these predatory lenders, better informs the buying public, we will continue to see the consumer being taken advantage of.  With proper education, affordable financing, and loan products tailored to the first time home-buyer, the Latino or any other person will benefit in obtaining the "American Dream" of homeownership.  Latino homeownership is one of the fastest growing segments in the USA.  While there are Latinos that have been caught up in this current sub-prime crisis, there are many more that are continuing to buy and live their dream.

Don Sanchez
 President, NAHREP-LA

Selected remarks written in the Los Angeles Business Journal, October 22-28, 2007.

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Press Release

October 31, 2007

FOR IMMEDIATE RELEASE:                                         

INDYMAC BANK’S GRUPOMAC LAUNCHES WEB SITE TAILORED FOR BROKERS SERVING SPANISH SPEAKING COMMUNITIES

GrupoMac is One of the First Lenders to Offer Loan Documents in Spanish

PASADENA, Calif. – October 31, 2007 – IndyMac Bank, F.S.B. (Indymac Bank^®), the seventh-largest savings and loan and the second-largest independent mortgage lender in the nation, introduced a new Web site for GrupoMac, its Hispanic Wholesale Division. GrupoMac aims to assist brokers and emerging bankers who serve the growing Hispanic community.  With the new site, available in Spanish and English, GrupoMac will be one of the only lenders to offer brokers and emerging bankers access to loan documents in Spanish. 

The newly launched Web site, available at www.imbgrupomac.com, also provides brokers and emerging bankers with other resources and supplemental information on Indymac’s products in order to better serve the growing U.S. Spanish speaking population. 

According to a recent U.S. Census report, Hispanics were the fastest-growing minority group in the U.S. -- more than 1.4 million Hispanics joined the U.S. population between 2005 and 2006.  Furthermore, this number is expected to grow even more.  By 2050, the U.S. Census predicts that Hispanics will make up 24 percent of the nation’s total population, a clear indication of growing demand in the Hispanic mortgage market.

By using the new GrupoMac Web site, brokers and emerging bankers will also be able to access Indymac’s award-winning technology platforms including QuickPricer, which provides immediate online pricing and e-MITS, which allows them to secure a price and ratelock online, 24 hours a day.

“We are constantly evaluating how we can provide our customers with the best possible service and by becoming one of the first lenders to offer a Web site solely for the Hispanic market, I am confident that we will be able to further increase customer satisfaction,” said Mark Mozilo, chief executive officer of GrupoMac at Indymac Bank.  “Our goal is to give brokers and emerging bankers a comprehensive package to offer their Spanish speaking customers.  Between GrupoMac’s knowledgeable staff and comprehensive dual language Web site, in addition to Indymac’s already diverse mortgage product offerings, we are confident that we have the best product mix on the market today.”

GrupoMac, a wholesale division of Indymac Bank, focuses on providing mortgage brokers and emerging bankers with Indymac’s competitive suite of mortgage products, which is tailored to the growing U.S. Spanish speaking population and supported by a staff of bilingual sales and operations specialists. 

NAHREP-LA Newsletter coming soon