Survey: Hispanics could generate $200b in new mortgages.

More Latino families would achieve homeownership and, in turn, generate an estimated $200 billion in potential new mortgages if the industry modified the way it evaluates Hispanic's non-traditional credit patterns, according to a survey of members of the National Association of Hispanic Real Estate Professionals (NAHREP).

According to U.S. Census, nearly one-third of U.S. born Hispanic residents and more than half of all Mexican immigrants lack checking or savings accounts. The 14,000-member trade association announced the results to the survey of real estate and mortgage practitioners at its annual convention in Las Vegas this week.

"The lending community has made strides to improve its services and products in large part by lowering credit standards and raising allowable debt-to-income ratios. While many Latino families have achieved homeownership as a result of these efforts NAHREP believes that continuing to lower the bar may not be the healthiest solution for consumers or the industry in the future," said NAHREP chairman Frances Martinez Myers.

"Broadening the current credit spectrum to be more inclusive of culturally influenced Hispanic borrower traits is what the industry must begin to do in order to continue to close the Hispanic homeownership gap."

A survey of 500 NAHREP members revealed the following:

* 37% of survey respondents ranked "limited" or "no credit" as the first or second most significant barrier to homeownership;

* 57% of respondents do not feel FICO scores are reliable in assessing risk for most Hispanic homebuyers;

* 78% of respondents said that for every client they place in a home, they turn away at least two prospective homebuyers because they do not qualify for financing;

* 30% of respondents said that more than half of their clients end up with sub-prime loans under the current rating system, and that limited or no credit history was the most common reason why they could not qualify for a prime loan.

* 54% percent of respondents said that 75% or more of their Latino clients are first-time homebuyers;

* 63% of respondents said that mortgage lenders are serving Latino homebuyers more effectively today than five years ago.

"Our members generally feel that while the industry is doing a better job of serving Hispanics, these homebuyers are still being penalized for being debt averse rather than being rewarded for their consistency in meeting financial commitments even if it is in cash," said Felix De Herrera, chairman-elect for NAHREP.

Credit scoring systems that automate the underwriting of non-traditional credit files are available today but not widely used across the industry. These scoring systems rate and score non-traditional traits such as cash income from multiple jobs, cash payments for cell phone bills, utility bills and rent, and cash remittances sent to family living in other countries. Manual underwriting of these loans is more expensive and increases the risk to lenders due to the subjective nature of the way these traits are weighed and evaluated by underwriters.

In a letter to HUD Secretary Alfonso Jackson and leaders at Freddie Mac and Fannie Mae, NAHREP, Asian American Real Estate Association, National Association of Real Estate Brokers, National Association of Realtors, National Association of Mortgage Brokers and Mortgage Bankers Association of America called for the industry support of more progressive credit scoring models that would enable more Latinos and other underserved Americans to qualify for home loans.

"We, as an industry, need to capture the creditworthiness for these new immigrant borrowers in a more accurate way through understanding their payment history not captured by traditional credit scoring system," DeHerrera added. "This is why NAHREP and other industry groups have called on the GSEs and HUD to take a leadership role by attempting to qualify these non-traditional borrowers in a fast and consistent manner."

The National Association of Hispanic Real Estate Professionals, a non-profit 501c6 trade association, is dedicated to increasing the homeownership rate among Latinos by educating and empowering the real estate professionals that serve them. Based in Washington D.C., NAHREP is the premier trade organization for Hispanics and has more than 14,000 members in 48 states and 47 affiliate chapters.