Two out of 3 Hispanic mortgage applicants are turned away because they can’t qualify under traditional criteria, according to a group of Latino housing professionals.The thousands of Hispanics who have achieved their ownership goals have done so largely because lenders have lowered their credit standards and raised their debt-to-income ratios, not because they qualify under normal guidelines, the group said.

But that may not be the healthiest solution for consumers or lenders, said Frances Martinez Myers, immediate past chairman of the National Association of Hispanic Real Estate Professionals.

Martinez said lenders must consider Latino cultural values “in order to continue to close the Hispanic home-ownership gap.”

At stake for any lender that can figure out how to safely evaluate the nontraditional credit habits of Hispanic families is a share of an estimated $200 billion in mortgages, the trade group said.

Nearly a third of all U.S.-born Hispanic and more than half of all Mexican immigrants lack checking or savings accounts, according to the Census Bureau. And in a recent survey of 500 members, a third ranked “limited” or “no credit” as the first- or second-most-significant barriers to ownership.

A third of the respondents said the lack of credit is the most common reason applicants cannot qualify for a prime loan. The same third said more than half end up with mortgages from subprime lenders who charge more.

While two-thirds of those polled said lenders do a better job serving Latinos than five years ago, 3 out of 4 said that for every client placed in a home, at least 2 are turned away because they cannot qualify for financing.

“Some said they turn away people on a 5-to-1 ratio,” said Gary Acosta, a co-founder of the 7-year-old organization, who called the 2-1 ratio conservative.

Several credit-scoring programs that underwrite immigrant and minority mortgage applicants using nontraditional forms of credit are available, but “they are not being adopted to the degree we would like to see,” said Acosta.

These scoring systems are based on such things as cash income from multiple jobs, cash payments for cell phones, utilities and rent, and cash remittances sent to family members living in other countries.

Called “thin” because they don’t contain credit and payment accounts, such profiles often are underwritten manually, which is not only more expensive but also considered more risky because of the subjective way these traits are weighed and evaluated.

“The time is right to take a leap of faith or adopt a change in strategy,” Acosta said. “Rather than lowering the bar, they should be more aggressive and more flexible.”

Source:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/12/24/REG0MN41IR1.DTL