- The Washington Times - Wednesday, January 19, 2005

Neyla Roa still finds it hard to believe that she got her family moved out of their basement apartment and into their first home over the holidays. For the first time, each child has his own room. But the stress of the yearlong search left little room for celebration.

First, Mrs. Roa made the mistake of locking in at an unrealistically high rate, which tied up her application for months before she found a competitive rate from another lender.

Then the family bid on four houses, losing out each time, before finally finding a new home in Silver Spring.

“The process was very difficult,” Mrs. Roa says. “The negotiations were complicated. I told my friends it was a lot of work.”

Hispanic homeowners are buying in record numbers, but the process remains riddled with barriers.

Less than half the country’s 39 million Hispanics own their homes, and the ethnic group is expected to enter the real estate market in force during the next 20 years. By 2020, Hispanics will represent 40 percent of new homeowners, according to the Harvard Joint Center for Housing Studies.

Advocacy groups are pushing for more programs to educate home buyers who face cultural or language barriers. Many lenders are targeting the market with bilingual speakers and Spanish-only Web sites, although like many first-time buyers, Hispanic home buyers can be bewildered by the approval process and often can’t satisfy lender guidelines, according to the Mortgage Bankers Association (www.mbaa.org).

“Education is the number one issue in terms of explaining how the market and products work,” says Doug Duncan, chief economist and senior vice president for the Washington-based MBA.

Many families find themselves priced out of the market or unable to satisfy stringent documentation guidelines required by mortgage lenders.

Predatory lenders also take advantage of new home buyers, tying families into higher-than-average interest rates, balloon payments and marked-up closing costs.

“We’ve had people coming in paying $17,000 in closing costs,” says Graciela Aponte, a housing counselor with the Housing Initiative Partnership (www.hiphomes.org), a nonprofit organization based in Hyattsville. “There are a lot of mortgage loan officers out there who speak Spanish and gain your trust, then end up taking advantage of people.”

HIP offers counseling programs and housing for low-income families. This summer, partly in response to predatory lending practices, the organization began a series of Spanish-language workshops.

The eight-hour workshop, “Tiempo de Comprar,” offered over four days, covers everything involved in the transaction, including satisfying lender requirements and comparing banks and interest rates. The course also covers contract negotiations, home inspections and appraisals.

“A lack of proper education is a real problem,” Ms. Aponte says. “I’ve had people come in and I look over their papers and they have an [adjustable-rate mortgage], but they didn’t know the payment was going to change.”

To improve access for Hispanics, the MBA has launched a recruiting drive targeting bilingual military veterans, trying to attract them to the industry to serve as loan officers and underwriters.

The association also is translating into Spanish its Web site for first-time buyers (www.homeloanlearningcenter.com) and will offer online courses in the next two months.

Problems persist for many home shoppers because the mortgage criteria are often difficult to meet and there are a lot of misconceptions in the Latino community about the home-buying process, studies have found.

Research conducted by the Federal Home Loan Mortgage Corp. (Freddie Mac) found that more than a third of Latino and black buyers falsely believe a down payment of 20 percent is needed to buy a home and roughly half of those in either group think a buyer needs perfect credit to qualify for a mortgage.

Many also are under the incorrect impression that they can’t qualify for a mortgage without a checking account or without having held the same job for three years, the Freddie Mac study shows.

Freddie Mac and Chase Home Finance launched a public-awareness campaign, “Home Ownership — Let the Truth Move You,” last fall to correct many common misconceptions and boost homeownership among minorities.

Hispanics — and others — who have recently immigrated represent a challenge because U.S. real estate and banking transactions are vastly different from those in their native countries.

“We found it in our experience and research that many people perceived the biggest issue being one of language, but it’s more about culture,” says Tricia McClung, Freddie Mac’s vice president of housing and community investment.

“Many don’t understand the banking structure we have here and how credit works,” she says. “In some cases, just getting them into a bank account is the first step.”

She urges new buyers to work with independent counseling agencies to help find suitable mortgage programs and establish credit and work histories to ease the application process.

Many can qualify for low-down-payment programs. New mortgage products are coming on the market next year to help cash-strapped families, she says. “Counseling is really helping people understand the whole process and the whole experience,” Ms. McClung says. “We don’t just want to put people in a home; we want to make them successful home buyers.”

Many workers can’t satisfy strict lender guidelines because they have few employment records, receiving payments in cash instead, or because they have no credit histories.

Many, especially those new to the United States, don’t have an available credit score because they rely on cash-based transactions and carry no credit cards. Those who have a credit history may have encountered debt problems and may know little about how to correct credit mistakes so they can qualify for more favorable mortgage terms.

Some immigrants are automatically disqualified because they don’t have permanent residency, even if they have applied for a green card, advocacy groups say.

Maricela Manzano was disqualified from a low- to moderate-income mortgage program because she still had not received a green card when she applied for a mortgage through a local bank. Eventually, she found a lender offering a mortgage at a higher rate in order to close on a one-bedroom condo in Gaithersburg.

“It’s very satisfying owning your own home, because the money you are paying you are not losing,” she says. “You feel comfortable with your piece of the American dream.” She credits close friends with walking her through the process and helping her find a lender.

“There is just a whole lack of familiarity with the process,” says Janis Bowdler, housing policy analyst for the National Council of La Raza, a national policy group based in Washington. “They’re first-time home buyers, and they are first-generation home buyers.”

For many families, the seemingly simple step of opening a bank account is the first step to home ownership. Up to a third of Hispanics don’t keep a bank account, which complicates the application process.

However, advocacy groups say they are starting to make some headway promoting counseling programs and pressuring lenders to allow some flexibility.

More institutions are starting to accept nontraditional forms of credit — cellular phone, cable and utility bills — showing a history of consistent payments.

“It’s difficult if it’s a household which has conducted all their transactions in cash,” says the MBA’s Mr. Duncan. “Try to keep all receipts and anything that shows a record of payments.”

The NCLR is pressing the lending industry for even greater changes to boost minority ownership. One would permit mortgage applicants to use individual tax identification numbers rather than other, more commonly accepted tax documents. Another would provide mortgages that cater to seasonal workers.

“There are programs for teachers or construction workers that would work and would allow for more flexibility,” Ms. Bowdler says. “One thing we’d like to see industry do involves products — special products and underwriting criteria changes — that provide more opportunities.”

Homeowners who have negotiated the complex application process face yet another obstacle that many families find hard to overcome: affordability.

Many Hispanics live in the priciest real estate markets in the country because jobs tend to be more plentiful, but not all can afford to live where they work.

The hot real estate market of the past decade has widened the gap even more, making a new home out of reach for many — even those who qualify for down-payment-assistance programs.

Unless government agencies and nonprofit groups find ways to boost low- to moderate-income housing, only wealthy families will be able to afford new homes, counselors warn. This could have a widespread economic impact.

“We’ve had people we’ve worked with for a whole year and haven’t been able to find anything,” Ms. Aponte says.

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