Creating opportunity for Hispanic homeownership

By: Barrett Burns
Date: June 25, 2020

Dear Colleague:

A recent study by the National Association of Hispanic Real Estate Professionals (NAHREP) has been making headlines and focusing attention on a topic of great importance to us at VantageScore Solutions and to the nation as a whole: longstanding requirements by Fannie Mae, Freddie Mac, and their regulator, the Federal Housing Finance Agency (FHFA), that their loan issuers use decades-old credit scoring models.

The outdated models don’t accurately reflect many post-recession consumer behaviors, and they exclude many creditworthy potential borrowers – including many Latinos seeking homeownership, who do not meet the behavioral criteria that conventional scoring models require to calculate a score.

Reporter Kevin G. Hall of The Charlotte Observersummed up the situation succinctly in the opening of his article on the NAHREP study:

They make up the fastest-growing segment of the U.S. population, yet Hispanics are increasingly locked out of homeownership because of tighter lending standards that rely on outdated measures of creditworthiness.

Brentin Mock of CityLab.com, an urban-living website produced by The Atlantic magazine, summarized the NAHREP data in an article of his own:

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 rated declined significantly last year, according to Pew Research Center.

We were pleased to see that both the Observer and CityLab.com cited NAHREP’s encouragement to Fannie and Freddie, known collectively as the Government Sponsored Enterprises (GSEs), to allow use of the VantageScore model in the mortgage space, as part of an effort to update its credit scoring methods with more advanced technologies that accurately score more potential borrowers. Use of such models would result in the inclusion of some Hispanic borrowers who are currently “credit invisible” – unable to obtain a credit score using traditional scoring models. In view of shifting U.S. demographics, we believe this change only makes sense.

We at VantageScore Solutions are committed to encouraging GSE acceptance of more inclusive, up-to-date credit scoring models. We invite you to follow these efforts by subscribing to the VantageScore GSE Lockout newsletter.

Wishing you all the best,

Barrett Burns