Sustainable Homeownership: Market and Policy Implications for Communities

The Congressional Hispanic Caucus Institute (CHCI), in partnership with NeighborWorks America, conducted a series of focus groups to gather information from Latino-serving institutions nationwide about best practices to prevent Latino foreclosure. The principal objective of this project was to identify the causes of foreclosure among Latinos and to present potential proactive solutions to the problem. Special emphasis was placed on identifying specific lending products and underwriting guidelines that best meet the needs of Latino borrowers.Focus group participants consistently expressed the need for flexible loan underwriting and products to meet the unique needs of the Latino community, such as nonstandard means for determining income, alternative credit use, down-payment assistance and verified cash income.The tightening of credit in response to increased foreclosures threatens the availability of loan products that are particularly useful to Latino borrowers.The abuse of flexible products, not the products themselves, was cited by participants as the cause of problems. Abusive practices mentioned included overstating income to qualify for a home rather than verifying undocumented earned income or placing borrowers in products whose future payments they cannot afford.Among other circumstances, the unique needs of Latino borrowers are caused by cultural factors. Latino communities depend on social networks and referrals to gain information and often identify real estate agents as their first point of contact and trusted advisor for all matters relating to homeownership. The reliance in Latino communities on informal networks makes them more vulnerable to unethical and predatory behavior, and oftentimes means that the client does not get adequate or appropriate assistance. Trained housing counseling professionals can objectively meet the needs of the Latino borrower.To ensure that the needs of Latino clients are met and the integrity of the homebuying industry is upheld, collaborative solutions to foreclosure must be sought. Partnership among housing counseling agencies and real estate agents, mortgage brokers and lenders is essential to support sustainable homeownership in Latino communities.Recommendations:- Lenders should be encouraged to continue the use of flexible underwriting methods coupled with homeownership education provided by a trained professional.- Leaders in the Latino housing community should facilitate communication between real estate professionals and housing counseling organizations to discuss how counseling can help homebuyers obtain and maintain homeownership.- The development of a system that allows professionals and consumers to anonymously report unethical acts is necessary to protect consumers