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St. Petersburg Times
A Culture For Lending
BY JEFF HARRINGTON
January 5, 2004
When Evelyn Xiomara Moretta wanted to buy her first home last year, the native of Puerto Rico sought a mortgage from the First Union bank branch in St. Petersburg where she had a checking account.
Once there, she struggled to understand a loan officer's English and puzzled over the paperwork. She paid a $375 fee upfront with no guarantee of approval for the house she coveted: a $68,000 two-bedroom in Kenneth City.
"They made everything so complicated I thought I would never be able to buy a house,'' Moretta said. "I was so frustrated.''
Midway through the process, a cousin steered her across the bay to Latino Home Loans in Tampa, where everything was handled in Spanish and with no advance fees. Moretta wound up saving nearly $100 a month in mortgage payments and paid less at closing. Satisfied, she returned to refinance this year. "They were so nice,'' she said. "I was feeling like I was at home.''
Executives at major banks have been chomping at their debit cards to reach the Hispanic market ever since data from the 2000 Census underscored that Hispanics are the nation's largest and fastest-growing minority group. Nearly 200,000 Hispanics live in Hillsborough County.
No wonder Bank of America, the biggest bank in Florida, has launched a series of national TV ads in Spanish and put Spanish signs in more of its branches touting the options available ("opciones, opciones, opciones''). Wachovia (formerly First Union), the state's No. 2 bank, is likewise eager to hire more Spanish-speaking tellers in its branches.
Yet, as Moretta's experience underscores, bridging the cultural divide does not come easy.
Mortgage executives at the big banks "just don't get it,'' says Arturo Giammugnani, a Venezuelan immigrant who founded Latino Home Loans eight years ago to cater almost exclusively to the Hispanic community. Hiring a Spanish-speaking loan officer, Giammugnani says, is not enough. Nor is putting ads on Spanish radio and TV stations.
It's a matter of culture, relationships and understanding your niche.
"The ability to tap (the Hispanic mortgage) market is not so much a product issue as understanding the culture and hiring people who feel familiar with the culture,'' said Charles Britton, community bank president for Gold Bank's Tampa operation. Like many community bankers, he'd like to hire a loan officer fluent in Spanish.
Latino Home Loans isn't the only bay area business zeroing in on the housing needs of Hispanics. Aventa Real Estate Services opened four months ago. It already has expanded beyond its Tampa headquarters to offices in Clearwater and Bradenton.
Aventa is the fusion of three Spanish words - a la venta (meaning "on sale''). The agency's tag-line, Aventate, comes from the Mexican colloquialism for "Go for it!''
Aventa president Omar Garcia said he based his business model on two formidable trends: First, the government estimates that as many as 50 percent of first-time home buyers will be Hispanic by 2010. Second, interest rates are expected to rise from their historic lows, meaning established, Anglo home owners will be less likely to sell.
The likely buyers of homes in a climate of rising rates: first-time buyers and immigrants with money.
"You talk to a Colombian about an 8 percent interest rate and they're smiling all the way to the bank,'' Garcia said. "They're used to paying 15, 20, 30 percent.''
The key to success for anyone marketing mortgages to the Hispanic market is flexibility. For many banks, the loan process has become rigid and formulaic. Approvals are tied to an applicant's credit scores, job history and income.
Latino Mortgage can't simply ignore those requirements because it resells the loans it makes to other lenders, and the other lenders insist on evidence that the home buyer is a reasonable risk.
But Giammugnani considers dozens of different ways to structure a loan depending on circumstances:
Many Hispanic immigrants from countries such as Mexico and Argentina don't trust banks, having lost funds in their home countries. They're more likely to have a lot of cash on hand and not much credit. That's helpful for a down payment but an obstacle for loan officers relying on credit reports. Giammugnani's solution is to help customers build credit, painstakingly cobbling together letters or receipts showing the applicant has been on time paying rent and utility bills for months.
For traditional banks, a red flag goes up immediately when an applicant submits W2s from four or five different employers over a 12-month period. But rather than being unable to keep a job, the applicant could be a hard-working Mexican immigrant who journeys from state to state to stay employed year-round: picking strawberries in Plant City, then apples in Michigan, and maybe potatoes in Georgia. Giammugnani seeks letters showing that the mortgage applicant has traveled back to the same farms year after year.
Venezuelans who have liquidated their overseas holdings or cashed out their companies often have plenty of cash but scant job history or new income in the United States. Similarly, self-employed house painters, yard workers and others paid in cash might not have W2s documenting income. Latino Home Loans solicits letters from its customers' customers attesting to a job well done. Those letters become part of the file that Latino Home Loans sends to a company that it uses to compile credit scores based on ratings by the main credit bureaus.
To build credit, Giammugnani and his staff advise clients to put $500 into a savings account and take out a bank loan for the same amount even if they don't need the emergency cash. The strategy is to pay the loan back gradually, and on time, to build credit over a year or two.
Still, not every applicant walking through the door will walk out with a loan. Every day, Giammugnani says, he has to tell people they probably wouldn't qualify. He views these encounters as a chance to educate someone about how to save for a down-payment, build credit or whittle down a debt.
"We work hard to find a way. We work Saturdays,'' Giammugnani said. "There is always a program for a different situation.''
Not all mainstream mortgage lenders are willing to take those extra steps. Housing experts say that's one reason why minority lending continues to stumble.
Hispanics in the bay area are being rejected for home loans 1.77 times more often than non-Hispanic whites while African-Americans are more than twice as likely to be turned down, according to a recent survey by the activist Association of Community Organizations for Reform Now, or ACORN.
And it isn't just a case of poverty. Upper-middle income Hispanics and African-Americans are more likely to be rejected for a loan than low-income whites earning up to half as much a year. ACORN, which bases its annual report on data collected through the Home Mortgage Disclosure Act, said that gap indicates banks aren't following up on promises of minority lending.
But in recent years, the big banks been more aggressive in courting Hispanics and trying to understand the market.
At Wachovia, first-time home buyers who are Hispanic have been identified as one of two key, emerging groups to pursue (the other is households headed by women).
"There is an effort here to hire more Spanish-speaking employees at every level of the company,'' spokesman Kevin Bezner said. "I could foresee a day when we have a Spanish-speaking person at every branch. That would be wonderful.''
If a Spanish-speaking customer enters a bank branch where only English is spoken, the customer is supposed to be directed to pick up a phone and contact Wachovia's 24-hour, multilingual call center in Miami, Bezner said. (If that didn't happen in Moretta's case, Bezner said, it was a mistake.)
Regulators have helped improve an uneasy relationship between some Hispanic immigrants and banks, most recently by allowing the banks to accept as a form of identification the matricula consular, an ID issued by Mexican consulates.
But banks still have a long way to go.
"One of the difficulties with certain Hispanic or Latino groups is that because of the country they came from, they are suspicious of banks in general,'' Bezner said. "So we do have to overcome that mistrust. That's something we're working very hard to do.''
Arturo Giammugnani experienced the language and cultural gap firsthand when he moved to the United States from Argentina 25 years ago. A 23-year-old immigrant, he had studied to be an accountant, but his broken English limited his job prospects.
For 11 years, he worked in a factory in Connecticut, cleaning and maintaining the bagelmaking machines for Lender's. On the side, he attended computer school to learn programming. Eventually, he got a job in an insurance company and then as an accountant for an oil company.
After spending a few years back in Argentina, where he met his wife, Giammugnani moved to Tampa in 1990. It didn't take long to find his calling.
While shopping for his first U.S. home in 1994, he couldn't find a bank or mortgage outfit that catered to the Hispanic market. So in 1995, with $10,000 in capital, he started Latino Home Loans out of a small house in north Tampa.
Today, his headquarters is in another remodeled home in north Tampa, pale green and nondescript. A smaller home behind it has been refurbished into extra offices.
Giammugnani could afford to have a fancier office, perhaps in a downtown office tower.
But he said he wouldn't think of it. It would move him too far from his clientele and make them uneasy. A tomato picker in work boots who would think nothing of trudging into the neighborhood loan office might think twice before visiting a downtown high-rise.
Almost 95 percent of Giammugnani's customers are first-time home buyers; most of them receive government-backed FHA loans. A sign outside beckons: "Ahora Si se puede!'' (Now you can!)
Empowerment is a big theme.
Giammugnani stresses it in the seminars he runs in the Hispanic community and in ads in Spanish-speaking newspapers and Spanish radio and TV stations.
Latino Home Loans spends $100,000 a year on marketing, 90 percent of it on TV commercials. Once a week, Giammugnani delivers a 15-minute radio spiel about why it makes more financial sense to buy a home and build equity than to "throw money away'' by renting.
In the radio pitches, he encourages listeners not to be intimidated about making the jump into home ownership. He steers them to homes through a side realty business and dabbles in developing homes through another.
Tampa police officer Hector Marrero said those "little tacky commercials'' on the radio caught his ear a few months ago as he was thinking about refinancing his Pasco County home.
Marrero said his wife, Lourdes, was getting the runaround at a couple of banks she visited. She found them rigid and unfriendly.
So Marrero visited Latino Home Loans. "It was like two different worlds. . . . It's not like a hassle where they're doing you a favor,'' he said.
He paid a lower interest rate than the one he was first quoted. Weeks later, Giammugnani called him to make sure he received his escrow back from his previous lender. "It was like going to your uncle for a loan,'' Marrero said.
Hispanic Home Loans is still small by most standards. It has eight employees and expects to close this year on about 300 loans, or $30-million in business. But the operation has caught the attention of the Hispanic community, receiving Small Business Entrepreneur of the Year recognition this fall from the Tampa Bay Hispanic Chamber of Commerce.
Tapping away at his computer recently, Giammugnani pulled down data from the latest two-month report from the government detailing default rates for FHA loans. Florida's default rate: 2.19 percent; Latino Home Loan's default rate: 0 percent.
"I got zip,'' he said enthusiastically. He attributed that in part to a campaign to educate customers about the seriousness of a mortgage and reminders to contact his company if they appear headed to financial problems.
In such cases, he sometimes urges the struggling homeowner to sell the house as soon as possible and buy something smaller.
"Most of the people understand that buying a home is not a joke,'' he said. "We're educating them.''
- Information from Times files was used in this report. Jeff Harrington can be reached at firstname.lastname@example.org or (813) 226-3407.
The rise of Hispanic clout in the United States
About 40-million U.S. residents are of Hispanic origin, or about 14 percent of the population.
Hispanics accounted for 3.5-million, or more than half, of the population increase of 6.9-million for the nation since April 2000.
The number of prosperous Hispanic households - those with incomes of at least $100,000 - rose 137 percent between 1990 and 2000.
About 26 percent of full-time, year-round Hispanic workers made $35,000 or more in 2001, and about 12 percent made $50,000 or more.
The purchasing power of Hispanics is expected to rise from $587-billion to $1-trillion in the next 10 years.
Source: Times wires, Times research, U.S. Census