Minority borrowers are one of the vital avenues for mortgage lenders to broaden their reach
in the coming years. With the demographic makeup of
the potential homebuyer pool in flux, it’s important for lenders and
originators to keep up with the trends for staying connected to Hispanic and African American borrower populations, among others, in order to continually grow their
footprint.
One of the most successful independent lenders in that
regard has been New American Funding. The California-based direct mortgage lender
has been developing initiatives for years to better reach minority clients. New American’s president and co-founder, Patty Arvielo, currently sits on
the corporate board of governors of the National Association of Hispanic Real
Estate Professionals.
Scotsman Guide spoke to Rick Arvielo, Patty’s husband and
CEO of New American, to learn about how to better engage minority consumers and help your mortgage business grow.
How important is it for lenders to keep working on their
outreach programs to minority borrowers?
I think it’s vitally important, because it’s somewhat more
confusing today than it has been in the past. For a lot of Latinos, for example, depending
on their status in the United States, especially if they’re undocumented,
there are some real concerns out there on what’s going to happen. [The
government had been] going back and forth on things like DACA (the Deferred Action for Childhood Arrivals program) and providing
lending to somebody who may or may not be a legal resident. The thing is that
it’s driving a lot of people underground, which is a shame, because they’re not
getting educated. And we believe that homeownership is just the greatest wealth
builder that America has ever known, so that education is important.
What has been the biggest challenge when it comes to
reaching out to these borrowers?
Just that it has to be effective. It has to be more
grassroots, and it’s different. With our other efforts, we can just blanket SEO (search engine optimization) search and do things like that to reach our borrowers, and we can be very
effective getting them to call and engaging them. But with those particular
markets, they go to who they trust. And right now, they’re much more trusting in
somebody that they can sit across the table with, so the in-market practitioner
has a definite advantage and will be more successful. It’s about building trust. … That means being there and
understanding best how to reach out culturally, and that’s face to face.
I think the other thing … is you have to be willing to put yourself
at risk and be manually underwriting these borrowers, because they just don’t
fit in the box, a lot of times, that is our automated underwriting engines. That
can be a risk position. But you have to do it because that’s what it takes to
provide a lot of these borrowers a chance at homeownership, because they do
save unconventionally and they earn unconventionally.
It’s a shame, because many Latinos collaborated very hard
during the recession — much harder, in some ways, than non-Hispanic groups —
and now they’re not able to enjoy it. The underwriting engines out there don’t
properly understand somebody who washes cars on the weekend or mows lawns or is
doing what many Latinos do to make ends meet and save money. Pooling money is
very common among relatives. There’s a lot of challenges to lending to this
group that we’ve been largely working through, through education and through
evolution in lending over the last decade. But in the meantime, you have to be
willing to show and earn that trust, and take a chance with manual underwriting.
What about New American’s efforts in the African American community? What are some initiatives you’ve found to be successful in
helping these potential buyers realize their homeownership dream?
With our African American borrowers, we have learned to
align with churches, because that’s a really great way to reach them and speak
to them. We do quite a bit of that, because that’s a trusted source. You have
to put yourself out there and in the community, because that’s very much seen
and appreciated.
We’re still kind of deep-rooted in a learning phase, but we
have branches in the Southeast where some enterprising loan officers have taken
it upon themselves to align with churches. We’ve flown down to Georgia to meet
with church leaders in the area, to talk about what the [housing] challenges are
in the African American community. What might we bring to bear on an
educational standpoint when we speak to them and help them prepare for
homeownership? It’s really appreciated, because [homeownership] is obviously vitally
important in terms of wealth [creation], so it’s vitally important to create an
opportunity to get into homeownership.