Five Questions With Gary Acosta, CEO of NAHREP
A 25-year veteran of the housing industry, Gary Acosta is co-founder and CEO of the National Association of Hispanic Real Estate Professionals (NAHREP), the nation’s largest minority real estate trade association with over 20,000 members and 35 local chapters.
Acosta also founded or co-founded a variety of real estate-related ventures including Prado Mortgage, New Vista Asset Management, CounselorMax, RealEstateEspanol.com, and The Mortgage Collaborative, a cooperative of mortgage companies who work together to increase profitability and market share, with the goal of providing access to affordable mainstream loans. He is a member of the Consumer Financial Protection Bureau (CFPB) consumer advisory board, and served in 2014 as chairman of its mortgage committee.
In the wake of September’s NAHREP 2015 National Convention and Latin Music Festival in Chicago, Acosta visited with The Score to offer his take on industry trends.
According to NAHREP’s recent “State of Hispanic Homeownership Report,” Latino incomes are rising and they are becoming the fastest-growing home purchasing demographic; however, they still run into obstacles such as making down payments, language barriers, low incomes and low credit scores. How is NAHREP seeking to address these issues?
The most important thing to understand about the Hispanic population is that it is a substantially younger demographic, with an average age of 27—a full 10 years younger than the general population. Younger people tend to have lower incomes, less wealth and thinner credit files. Some of this will work itself out as the population ages, but issues like language and other cultural nuances will require some modification of the way the industry does business. NAHREP addresses these issues by first educating the industry about them and secondly by advocating to government and corporations for products and services that are more relevant to Hispanic homebuyers. The recent announcement by Fannie Mae where they will start considering things such as broader income and non-occupant co-borrowers is a step in the right direction and an indication that Fannie is looking closely at the Hispanic market for growth opportunities.
A topic discussed at last month’s NAHREP National Convention & Latino Festival was entrepreneurship. Why do you think we are seeing an increase in entrepreneurship amongst Hispanic-Americans?
Hispanics are entrepreneurial by nature. When the economy was struggling, we saw less small business formations across the board, but as the economy improves we see more businesses being created. However, it is also important to note that more frequently we are seeing that when the general market reacts slowly to Hispanic business opportunities, Hispanic small businesses are starting to fill those gaps. The emergence of several fast-growing mortgage banking firms that are led by Hispanic entrepreneurs such as New American Funding and Alterra Home Loans are evidence of this trend.
What financial behavioral traits do you generally see amongst Hispanic-Americans that help/hinder their access to mortgage loans in the current underwriting environment? What do you think the mortgage industry can be doing better to help address the unique financial nuances of Hispanic-American homeowners?
Hispanic immigrants tend to use credit and banking services much less frequently than other populations. This is both good and bad. On one hand it shows financial discipline but it also makes it tougher to qualify for mortgages and unfortunately some very deserving people are either not getting financing or are paying more to get a loan. Non-traditional income is also something that is both cultural and problematic for mortgage qualification purposes. These issues are not unique to Hispanics, as younger millennials also share some of these characteristics. The industry needs to find new metrics to predict financial capacity and evaluate credit worthiness. These will be the biggest challenges for our industry in the coming years.
According to your report, about one-fifth of Hispanic millennials indicate near-term plans to obtain a mortgage. How can the industry make the process of securing a loan and buying a home more enticing for Millennials of all demographics?
We have to go where the customers are, and not expect them to come to us. This is both in the physical sense and the behavioral sense. Obviously, I am biased, but NAHREP is a great place to find them in the physical sense, and it is also a great place to learn where they are from a behavioral sense. Beyond having the right products and services, the key to the Hispanic market is trust. They will do business with you if they trust you and they can’t trust you if they don’t know you.
In what is called the “Hispanic Wealth Project Blueprint,” NAHREP aims to triple U.S. Hispanic household wealth in the next 10 years. What are the pillars of this plan?
NAHREP is in a unique position to provide leadership on the subject of household wealth— first because the primary source of household wealth is home equity and secondly because the bulk of our membership are small business professionals, a secondary source of household wealth.
Our strategy to accomplish this goal focuses on the areas where we think we can have the biggest impact.
Our first objective is to get the Hispanic homeownership rate at 50% or greater. Considering that Hispanic household formations are growing rapidly, this would require approximately 3.2 million new owner-households.
The second objective is to improve the first year success rate of Hispanic-owned businesses. Our research showed us that Hispanic-businesses tend to fail in the first year at a much higher rate than other populations but after the first year, they do as well or better. We think this has a lot to do with the lack of mentorship in the community.
The third objective is to guide more Hispanics to participate in non-cash financial assets such as retirement accounts and the stock market. Again, our research showed that Hispanic-Americans tend to participate in non-cash financial assets at a lower rate regardless of income. The fact that we were not well-diversified is the primary reason Hispanic wealth took a bigger hit than other populations during the financial crisis. These are lofty but attainable goals. We expect our Hispanic Wealth Project to be core to the association in the coming years.