Thread: Hispanics feel subprime home lending pain

Hispanics feel subprime home lending pain
Wed Mar 14, 2007 4:28PM EDT

By Patrick Rucker - Analysis

WASHINGTON (Reuters) - Only a few weeks ago, a borrower in Southern California could qualify for 100 percent financing for a house, with no proof of income or assets.

Now, the lending spigot is dry.

"Everybody is running scared, " said Yamila Ayad, a San Diego mortgage broker who specializes in serving Hispanic clients.

"I have been getting these flashes across my screen: This product is going away," she said. "They have retracted the products."

U.S. Hispanics may disproportionately feel the pain as the subprime mortgage sector implodes, shutting off the credit they had relied on to realize the American dream of owning a home.

Hispanics hold roughly 40 percent of mortgages in the troubled subprime mortgage market, a sector that caters to those with damaged credit or little borrowing experience, according to the Center for Responsible Lending.

As late payments and defaults have risen in recent months, many subprime borrowers now risk losing their homes.

More than two dozen subprime lenders have gone out of business in the last year in the face of rising interest rates and falling U.S. house prices in many regions.

Many subprime finance companies jumped into the mortgage business with lax underwriting standards during a five-year run up in home values that ended in 2005.

Looser credit meant home ownership became available for many Hispanics working in a cash economy and who do not have the extensive credit histories that traditional lenders require.

"These borrowers do not have bad credit but thin credit histories. They have not participated in the banking industry," said Gary Acosta, a founder of the National Association of Hispanic Real Estate Professionals.

Roughly one in four Hispanic adults do not have credit scores from rating agencies and so are immediately off-limits to many mainstream lenders, Acosta said,

Despite recent woes, subprime lenders made homeownership possible for many worthy Hispanic borrowers, he added. But as lenders abandon the sector, Hispanics are likely to lose out.

TAKING A CHANCE

Subprime lenders might have offered too much easy money at the end of the housing boom, but for years they were the only source of funding for Hispanic borrowers, said Ayad.

Those lenders deserve a large share of credit for a five percentage point increase in Hispanic home ownership in the last five years, according to both Ayad and Acosta.

The Hispanic home ownership rate has risen to 49.7 percent from 45.5 percent in seven years.

"There is no question that product innovation has, to a large degree, happened in the (subprime) segment and that has helped impact Latinos in a positive way," Acosta said.

While subprime has served a purpose, the long-term goal should be getting Hispanic borrowers into prime rate mortgages, said Janice Bowdler, a housing specialist with the National Council of La Raza, a Latino advocacy group.

Rather than rely on credit card histories to assess a borrower, lenders could accept timely rent and utility payments as proof of being a good risk, she said.

But traditional lenders have resisted that change and often turned away Hispanic borrowers because they do not fit a cookie cutter profile, she said.

"Defacto, lenders are pushing these borrowers into subprime products," she said.

While subprime delinquencies have climbed to over 13 percent, Acosta said many Hispanics would still take a chance on homeownership under those terms.

"If you tell the average Hispanic consumer you have a 90 percent chance of success -- that's pretty good compared to, probably, some of the odds they have had to overcome to get where they are today."

http://www.reuters.com/articlePrint?art ... 6320070314

I hope you all have your hankys near by.

"I have been getting these flashes across my screen: This product is going away," she said. "They have retracted the products."

U.S. Hispanics may disproportionately feel the pain as the subprime mortgage sector implodes, shutting off the credit they had relied on to realize the American dream of owning a home.

What - is this some kind of surprise?

Watch out! Before ya know it, Cornyn, kennedy, mccain are going to ask if WE'LL COVER their mortgages. You know, a piece of the American Dream

Zip your wallets everyone!!!!

I say are you watching B of A , I believe this just might be your fate down the road shortly and can't think of another American traitor I would rather see it happen to!!!!!

I hope it happens to all these traitors, but, will the American taxpayers have to pick up the bill from these defaults? That is what concerns me.

It;s about time the chickens go home to roost.....I've been waiting for this for 8 YEARS---ever since that moron Greenspan INFLATED OUR ECONOMY!

Good riddens---and I'll be happy if rates continue at their pace over the next two years!

B of A had huge exposure, as did CHASE---private banks---too bad---heheh!

Originally Posted by DavidWidman

I hope it happens to all these traitors, but, will the American taxpayers have to pick up the bill from these defaults? That is what concerns me.

I read somewhere, I think on here, that the B of A has an agreement with the government on this credit card scam that if the people default, the government (taxpaying citizens) will bail out B of A. I think one way or the other all these costs will be passed on to Americans....the legal ones.

I am sure they also account for a large percentage of foreclosures as well. These subprime lenders gave mortgages to people who did not qualify for traditional mortgages and basically could not afford home ownership now they are in foreclosure. Of course I do not feel bad for these lenders as they gave mortgages in many cases to illegal aliens and are now stuck with properties they cannot sell in a down market. Serves them right

Thanks for finding this article.

I had a gut feeling these loans went to illegals...even though the article doesn't say it's illegals......we need to find out!

While subprime has served a purpose, the long-term goal should be getting Hispanic borrowers into prime rate mortgages, said Janice Bowdler, a housing specialist with the National Council of La Raza, a Latino advocacy group.
Rather than rely on credit card histories to assess a borrower, lenders could accept timely rent and utility payments as proof of being a good risk, she said.

NCLR can't be serious. If the Hispanic borrower is legal, there shouldn't be a huge problem getting prime rate mortgages, as long as the borrower had held a job for a certain period of time. But does the NCLR really believe that lenders should accept "timely rent and utility payments as proof of being a good risk"?!