Fintech companies are coming to the aid of the historically underserved Hispanic community in the US. Many are rising to the challenge of addressing the imbalance between loan deals and mortgages for Hispanic customers in the US and those for white Americans.
According to the Pew Research Center, US Hispanic citizens find it harder to win approval for conventional mortgages than their white and Asian counterparts; and when approved they tend to pay noticeably higher interest rates. Figures from the Federal Deposit Insurance Corporation reveal that more than 12% of Hispanic citizens in the US do not hold a bank account, compared with 2.5% of white Americans.
Hispanic homebuyers are projected to represent 56% of all new homeowners in the US by 2030, according to the National Community Reinvestment Coalition. But as recently as three years ago, just 24% of Hispanic applicant home loans came from a bank – the lowest level of bank lending to any group. Hispanic applicants were also 43% more likely to be denied a loan, paid over 40% more to close a home purchase loan and paid 30% more in interest in comparison with white Americans.
Bridging the language gap
At the end of last year, Spanish-owned personal finance products company Crediverso launched what it claimed was the first bilingual financial products marketplace platform in the US. Hispanic consumers in the US, it says, are “two to three times” more likely to be underbanked than the rest of the US population.
The free-to-use digital platform is dedicated to the Hispanic community, providing consumer access to fresh, relevant and unbiased content, including comparison tools, a free credit check, and insurance and loan options.
Hispanic citizens make up nearly 20% of the country's population, but US banks typically commit less than 4% of their marketing budget to this demographic, according to Crediverso. US Hispanics, it says, currently spend more than $600bn annually on financial products, but have only a fraction of the access enjoyed by the general market.
In late July, mortgage technology provider Maxwell launched a bilingual option for mortgage applications. The platform is intended to help lenders better serve the growing Hispanic American market, and to improve access and user experience for Hispanic Americans with limited English proficiency.
California-based MMC Lending, which is implementing the new Maxwell bilingual platform “in the next few days”, is an existing user of the company’s original English-only system. Currently some 25% of the lender’s mortgage applicants are Hispanic and it expects this proportion to rise once it has fully implemented the new platform. Tom Hamilton, MMC executive vice-president, says: “Having the Maxwell Español system will help us to originate more loans, both from accommodating the Hispanic customer and by attracting additional loan officers to us.”
“It’s a step towards being inclusive to folks in our primary target market,” he adds.
According to Maxwell co-founder and chief technology officer Rutul Davè, the platform was redeveloped to encompass and support limited English proficiency. “As the Hispanic American homebuyer segment continues to grow at a rapid pace, lenders must be able to meet this demographic’s needs to fully reach the communities they serve. We aim to help lenders establish trust and understanding with their Spanish-speaking customers and improve the pathway to homeownership with a fully bilingual mortgage experience.”
lenders must be able to meet this demographic’s needs to fully reach the communities they serve
Hispanics are growing into technology, he says, and many are now using Spanish-language banking apps.
Previously, he explains, Hispanic customers often used their teenage children to help translate for them during the loan or mortgage application process. But while the younger generation’s English tends to be better, they are often not familiar with the language surrounding banking, property or title issues.
Big players turn their focus
Major banks are also targeting this growing market. Bank of America (BofA) has made a five-year, $1.25bn investment in the Hispanic-Latino community to focus on affordable housing, health, jobs and small businesses. According to Raul Anaya, BofA president of business banking and president for greater Los Angeles, about one in every three chequing accounts opened with the bank are by Hispanic-Latino clients.
According to a report from mortgage finance lender Freddie Mac, Hispanics are one of the fastest growing demographics, but lack of available, affordable housing in many areas and credit-related challenges have prevented some from getting a mortgage. In addition, some homebuyers with limited English proficiency are hindered by gaps in communication, education, understanding and the confidence necessary for the complex homebuying and mortgage processes.
The report says the Hispanic homeownership rate is influenced by the same factors that influence that of white, non-Hispanic Americans, primarily age, income and education. These factors account for almost 90% of the differential between Hispanic and white populations.
Adding to reports of the rising percentage of Hispanic homeowners, financial product comparison website Bankrate reported in late July that from 2010 to 2020 the Hispanic population in the US increased by 23% and now holds around $1.7tn in purchasing power.
As innovative multilingual products proliferate, it seems fair to predict that the pace of new Hispanic homeownership in the US can only accelerate.
