Lack of Homebuying Information Key Barrier to Mexican-American Homeownerships, Study Asserts

LOS ANGELES – Record low mortgage rates over the last couple of years opened the door to homeownership for millions of Americans. Unfortunately a lack of trusted sources of information kept hundreds of thousands of Mexican-Americans from benefiting from the rate environment. That factor in fact remains a key barrier to homeownership facing Mexican-Americans, a study from the Tom’as Rivera Policy Institute of Southern California finds. The study, El Sue~no de su Casa, that was funded by Freddie Mac and was based on a survey of 1,400 families in Atlanta, Houston, and Los Angeles of Mexican origin – the largest of the Latino national origin groups in the U.S. – also found that when looking for trustworthy information about home buying, Latinos of Mexican heritage look first to real estate professionals (38%), followed by friends and co-workers (17%), and family members (16%). Only 12% named homebuying seminars or classes, and 9% indicated financial institutions; 6%, community organizations; and 3% church groups. That doesn’t surprise Security Service Federal Credit Union SVP John Worthington who said studies conducted over the years have repeatedly shown that many Mexican-Americans don’t feel comfortable dealing with financial institutions and “don’t have a high trust factor” with them. In June, SSFCU entered into a partnership with Neighborhood Housing Service and committed to fund $10 million in loans with the non-profit group that targets individuals below 60% of the area median family income. The $3 billion SSFCU also made a $10,000 donation to help fund homeowner education and overall operations. “There are many Mexican-Americans who because of their income level or lack of experience or basic mistrust of financial institutions assume they cannot own a home,” Worthington said. Freddie Mac estimates the Latino community will account for 31% of the U.S. household growth between 2000-2010, making it the fastest growing minority group. The report says 84% of Latino renters “strongly” desire to buy a home, and 55% plan on buying one in the next five years. The Tom’as Rivera Policy Institute estimates at least 1.5 million Latino households will buy homes by 2010, but it opines that another 700,000 Latino families could become homeowners if groups and organizations took proactive steps. So what is blocking them? The chief difficulties anticipated by the study’s respondents who plan to buy within the next five years were a lack of familiarity with the mortgage process (64%), saving for a downpayment (53%), and finding a trustworthy advisor (53%). For credit unions interested in proactively implementing programs to reach out to Mexican-Americans, Worthington emphasized that “this is a very diverse and heterogeneous group.” He opined that the most frequent mistakes he observes well-intentioned CUs make in reaching out to the Latino is generalizing. “It’s very hard to paint a big brush stroke across this population because they’re so diverse and they’re each very proud of their own heritages,” Worthington says. “People from Mexico are as different from people from Guatemala as night and day, and the same is true say for people from Puerto Rico and Cuba. The Latino community is a real melting pot, and credit unions have to take that into account as an important factor when they shape their programs. You can’t generalize.” In fact, the Tom’as Rivera Policy Institute breaks down the Mexican-American market into three homebuying groups – Dreamers (29%) who want to own but say they’re unlikely to buy in the next five years; Planners (44%) who expect to become homeowners within the next five years; and Doers (11%) who are actively shopping for a house or are in contact with a lender. The remaining 16% are considered Visitors and indicated they do not plan to buy a home. The report also polled Achievers, households that bought their first house within the last two years. Dreamers and Planners indicated they’re unable to buy a home in the immediate future because they cannot find a house they can afford (43%), face an insecure financial situation (27%), may leave their current city soon (6%), or are waiting to have children (4%). According to the study, Dreamers and Planners are 34 years old, 72% are foreign born, 63% are married and the average household has 1.7 children. In addition, only 38% report incomes over $35,000, 52% have bank accounts, and 50% have credit cards. By contrast, the average age among Doers and Achievers is 38 years old, 79% are married, 64% are foreign born, and the average household has 2.0 children. Forty-seven percent have incomes over $35,000, 67% have bank accounts, and 60% have credit cards. In addition, 74% of this group are U.S. citizens or permanent legal residents, compared to 58% of Dreamers and Planners. Worthington advises credit unions that are interested in implementing homebuying programs for Mexican-Americans to promote the program both internally and externally, and to find a vehicle to help them reach this population by partnering with an organization that’s already established in the community, such as the Neighborhood Housing Service. At press time, SSFCU had just funded its second loan for NHS worth $50,400. The previous loan was for $35,000. The CU has $260 million in its mortgage portfolio, and Worthington says it originates about $100 million in mortgages a year. -