As more Hispanic and Latino people decide to make America home, they’ve been less able to actually buy a home in recent years.
The homeownership rate for Hispanic Americans was 45.4 percent in 2014—the lowest it’s been since 2000, and the first time it’s dropped below 46 percent in the same time period. This rate has steadily decreased every year since 2007, when it peaked at 49.7 percent, according to an analysis of Census Bureau data by the National Association of Hispanic Real Estate Professionals (NAHREP). This despite the fact that incomes for Hispanics are rising — they are the only major racial or ethnic group whose poverty rate declined significantly last year, according to Pew Research Center.
The NAHREP report suggests that the conventional methods for financing new homes are culturally mismatched with how many Hispanics deal with finances, such as saving and making payments primarily with cash. (NAHREP defines “Hispanic” as “a term generally used to refer to individuals of historic Spanish ancestry,” and uses it interchangeably with “Latino” in the report.) That is, “there is little evidence that the industry as a whole has done much to address the
Those nuances have rendered many Latino Americans “credit invisible,” a term the federal Consumer Finance Protection Bureau (CFPB) uses to describe people who either don’t have enough credit history for lenders to track, or have no history at all. Roughly 26 million Americans fall into this category, according to the CFPB. However, African Americans and Hispanics are far less visible when it comes to credit, with 15 percent of each of those populations falling into this category compared with 9 percent of whites. The racial/ethnic disparities exist across all age groups.
Which is why the NAHREP has made expanding credit access for potential Latino and African-American homebuyers a policy priority for this year. The agency recommends that financial institutions shift away from their reliance on the FICO credit scoring model, which doesn’t track expense histories like monthly rental payments, and other transactions not picked up by banking systems. The association asks that lenders start consulting with alternative credit score systems, like VantageScore, that take a more modernized and holistic approach to evaluating lending risk.
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