Creative lenders can reach Hispanic home buyers

By Timothy Pratt (contact)

Friday, Nov. 3, 2006 | 7:23 a.m.

At 24, Reina Sanchez could be considered an overachiever: She finished law school in her native country of Mexico, she's a mother of a 2-year-old boy, and eight months ago she and her husband, Alvaro, bought their first home.

As Hispanics, the family represents a sector of the home-buying market that real estate agents and lenders in Las Vegas and nationwide are eagerly courting.

As undocumented immigrants, they also represent the X factor in that effort, because nobody knows how many homes are being sold to Hispanics living in this country illegally.

Tim Sandos, president of the National Association of Hispanic Real Estate Professionals, said there may be $200 billion to be made in reaching out to native-born or naturalized Hispanics nationwide, and an additional $44 billion from selling homes to undocumented immigrants.

Doing business with customers who have broken federal laws by living in the U.S. without permission is bound to be controversial, experts said. But they also point out that there is no law barring the practice.

Young, fast-growing and hardworking, Hispanics as a group will constitute four of 10 first-time home buyers by 2010, said Sandos, whose 14,000-member association is holding its annual convention in Las Vegas this week.

But they also pose challenges for the industry, because those on the bottom end of the assimilation curve - either because they are undocumented or simply new to U.S. life - may be holding onto a culturally based aversion to credit and doing most of their business in cash.

As a result, commonly used credit-scoring systems may not be a true measure for a mortgage loan, experts said.

The answer, some believe, is developing new methods of evaluating potential home buyers that take into account factors such as payment histories with utility bills, as well as money orders sent home . Then, lenders have to be trained to use those methods.

Mark Catone, senior vice president of First American Creditor Information Group, termed recent interest in the issue "the rebirth of the credit score."

His company is expected to unveil today its version of what the industry calls alternative credit services, as well as a directory of lenders willing to work with the new method.

Other items on the conference agenda include loans using what's known as a taxpayer identification number, issued by the IRS, instead of a Social Security number - a key consideration for doing business with undocumented immigrants, who can obtain the former legally, but not the latter.

Sanchez came from Sinaloa, Mexico, to Las Vegas nearly three years ago and is still learning to navigate everyday affairs in English.

Although professionally trained, she says the pay at government agencies in her hometown would never match what her husband can earn building homes in Las Vegas.

He entered the U.S. through the desert in Arizona. She followed with a tourist visa, which she renews by returning alone every six months or so.

After squeezing into apartments and mobile homes with other family members for several years, she and her husband tried to buy a house using the same methods as thousands of other families in her situation, including asking her husband's uncle, a naturalized citizen, to purchase a house for them in his name.

But they kept running up against high interest rates and other unfavorable terms.

They almost gave up, until they met Helena Garcia, a community advocate who told her about a new program at Citibank that uses the IRS-issued number and alternative ways of measuring creditworthiness.

Sanchez's husband had used the number to pay taxes on his wages, an idea she pushed because she thought it would be useful if the federal government ever offered a pathway to legalization. Finally, in March, they closed a deal on their three-bedroom, $215,000 house with a 6.5 percent interest loan.

Garcia said that programs such as Citibank's, or those being discussed at the association's conference this week, could serve up to 50,000 families in the Las Vegas Valley.

She also said there needs to be a way to screen out unscrupulous lenders who might use such programs to gain access to Hispanic customers, only to take advantage of them .

Catone said his company checks the background of lenders interested in working with his program. He also said that families such as Sanchez's wouldn't have been able to buy a house at the rates they did, if at all, several years ago.

"This whole issue has only heated up in the last 36 months or so," he said.

Despite growing industry interest in marketing to Hispanics, including the undocumented, companies are keeping an eye on Washington, he said.

"The immigration debate has cast a lot of doubt, especially for lenders, who ask, 'Should we act?' " he said. "Congress needs to get something on the books, because if it stays in stasis, it may be very hard to get lenders off the dime."

Meanwhile, at her simply furnished home, a barbecue grill out front, Sanchez said the controversy surrounding families like hers buying homes is sometimes difficult to grasp.

"The government knows we're here, where we are, what kind of work we're doing ... They let us work, let us pay taxes - why shouldn't we be able to buy a home?"