The National Association of Hispanic Real Estate Professionals (NAHREP) is a non-profit 501c6 trade association with over 15,000 members in 48 states and 63 affiliate chapters across the nation. Last year our members participated in approximately $65 billion in loan originations, influencing nearly 25% of all Hispanic lending in America. Based in Washington, D.C., our members are real estate agents and brokers, loan officers and mortgage brokers, title officers, escrow officers, appraisers, insurance agents and more. They are from diverse cultural backgrounds as membership is not limited to professionals of Hispanic origin.
NAHREP's mission is to increase the rate of Hispanic homeownership by empowering the advisors that serve them.
We accomplish this by providing educational tools to the industry, a networking forum, and legislative and regulatory advocacy supporting sustainable Hispanic homeownership. Our Vision is not just to "tap into" the purchasing power of the Hispanic market, but to utilize home ownership as the cornerstone by which Hispanic families can achieve financial stability and economic wealth.
Hispanic owner-occupied homes increased by 3.1 million reaching a total of 6.9 million in 2005. This is an 81 percent increase over the 10-year period beginning in 1995 and compares to a 19 percent increase for all other non-Hispanic owner-occupied homes. Hispanics accounted for 50 percent of the nation's population growth between 2000 and 2004.
Hispanic Purchasing Power increased to over $865BB in 2007 representing an increase of 457%. Hispanic purchasing power is anticipated reach over $1 Trillion by 2010.
Hispanic incomes are growing the fastest in the $75,000 to $99,000 category, with the number of Hispanic households earning over $75K increasing faster than the number of Hispanic households earning less than 75K. While 50% of all U.S. Hispanic Households earn $50K or more, affluent Hispanic buying power is estimated to be 2/3 of the entire U.S. Hispanic buying power.
Professional Licensure and Preventing Predatory Lending Practices
Recent events in the housing market including declining home values, the current credit crunch and ongoing negative economic forecasts have created a perfect storm that has decreased consumer confidence and turned the American Dream into a nightmare for many. Hispanic home owners have suffered setbacks as the fourth quarter of 2007 saw the first decline in Latino Homeownership rates after years of steady growth. Many Hispanic consumers were exploited by a few unscrupulous actors thereby tainting the image of this industry.
In response, En Confianza: The NAHREP Code of Trust was unveiled as part of a strategy to ensure that every American home buyer is served based on the highest industry standards. NAHREP's Code of Trust responds to the ethics of our members and ensures that they set an example for the industry as a whole. En Confianza sets requirements for four groups of professionals - mortgage originators; licensees and realtors; builders; and providers of title, escrow, home inspection, and closing services.
NAHREP's Position:
"En Confianza: The NAHREP Code of Trust" is based on measures that foster ethical and responsible lending, protections for consumer choice, full disclosure and accountability: The principles include:
· Stronger licensing and industry education requirements for and best practices
· Creation of a national directory to track individual performance of all loan originators and mortgage brokers
· Ensure stricter regulatory sanctions and the highest ethical standards such as prime loan filters and net-benefit tests to ensure that all qualifying consumers are offered a prime loan
· Due diligence to ensure lending products match a borrower's ability to pay
· Increased levels of disclosure so that borrowers can make informed decisions
· Development of a bi-lingual guide to educate consumers on all choices of products
· Protections against conflicts of interests
· Full compliance with all state and federal laws
NAHREP will advocate for legislation to protect consumers against unfair and deceptive practices in connection with higher cost mortgage transactions. Proposed legislation should strengthen the civil remedies available to consumers by providing uniform lending standards. Legislation should also include provisions to improve housing counseling, ensure better mortgage servicing methods, and enhanced appraisal standards. Regulatory oversight must include new disclosures including interest rates and fees when comparing sub-prime to prime loans, type of originator or broker used for the transaction, credit risk score, and interest adjustments with increased length of term for refinancing debt. Penalties for knowingly steering a customer should include at a minimum, restitution for the consumer's actual financial damages and reasonable attorney fees. Finally, legislation and regulatory requirements should also include language to establish licensing and minimum standards for all loan originators and mortgage brokers in the same fashion.
Bankruptcy Reform and Foreclosure Prevention
Today, a mortgage secured by the principal residence of a debtor cannot be modified in bankruptcy. This policy has been in existence over 100 years, since the Bankruptcy Act of 1898. In the wake of the current housing crisis, several bankruptcy reform bills have been proposed to amend the bankruptcy code to allow bankruptcy judges to modify the mortgage interest rate and terms, as part of Chapter 13 proceedings. Recently, both the U.S. House of Representatives and Senate have passed bankruptcy reform legislation that includes provisions granting judges the authority to modify mortgage terms and conditions. Representatives Brad Miller (D-NC) and Linda Sanchez (D-CA) introduced H.R. 3609, the "Emergency Home Ownership and Mortgage Equity Protection Act of 2007. Congressman Steve Chabot (R-OH) introduced H.R. 3778, the "Home Owner's Mortgage and Equity Savings Act" or "HOMES Act," which allows modifications on a debtor's principal residence while placing limits on the types of loans. In the Senate, Senator Richard Durbin (D-IL) introduced S. 2136 also changing the Bankruptcy Code to allow judges to modify loans. Finally, Senator Harry Reid (D-NV) introduced S. 2636 "The Foreclosure Prevention Act of 2008" also including a measure giving judges the authority to modify loan terms.
NAHREP's Position
Do not Grant Bankruptcy Judges the ability to modify mortgage terms:
While we respect the intent of supporters of this provision, it is our belief that the long term negative impact on lending for future generations will be significantly more harmful than the short term benefit gained by allowing bankruptcy judges to change the terms and conditions of mortgages on a debtor's primary residence. NAHREP will advocate for appropriate measures that will aid in the prevention of foreclosures so long as these measures do not increase costs, increase risk and decrease liquidity that could negatively impact Hispanic home buyers at a time when they can least afford it.
The National Association of Hispanic Real Estate Professionals (NAHREP) supports the following provisions of any legislation or regulatory policy on foreclosure prevention:
· Increase funding for pre-foreclosure counseling
· Allow Housing Finance Agencies (HFAs) to issue bonds for refinancing.
· Permit the use of CDGB block grant funding to purchase, rehabilitate, demolish, rent or sell foreclosed or abandoned properties.
· Allow corporations to apply excess net operating losses to tax returns from prior profitable years and receive any applicable refunds
· Amend the Truth-In-Lending Act regarding loan disclosures
· Permit a bankruptcy plan to provide for waiver of any prepayment penalty contained on a claim secured by debtor's principal residence.
GSE Reform
NAHREP supports congressional efforts to strengthen the regulatory oversight of the GSEs to ensure market and public confidence in these vital housing institutions while expanding their capacity to meet their public mission to increase homeownership opportunities among underserved communities. NAHREP supports a strong regulator for the GSEs and will continue to advocate for flexibility related to product approval and portfolio management. However, that also means that these institutions must have the flexibility and market incentives to pursue their business and mission without being hampered by unnecessary regulations. It is critical that the GSEs be given the necessary tools to pursue their affordable housing mission and be held accountable to meet the lending needs of minority communities.
NAHREP's Position:
Increased GSE Efforts in Minority Areas:
NAHREP believes that the GSEs are in a critical position to do more for Hispanic homeownership, and our organization will continue to partner with the GSEs to do more for the Hispanic market. In this regard, the new legislation must create both incentives and regulatory requirements to set goals and meet targeted minority lending loans.
Conforming Loan Limits:
The economic stimulus package recently adopted by Congress provides realistic loan limits for the GSE's to adequately address the challenge faced by minority and first-time homebuyers seeking affordable loans in high-cost areas. NAHREP supports permanently increasing conforming loan limits to enable homeownership opportunities for Hispanic Americans.
Portfolio Limitations:
NAHREP cautions against any proposal that would effectively lead to severe restrictions or the setting of caps on the size of the GSEs' mortgage portfolios, limiting their capacity to provide sufficient liquidity to growing markets made up of minority and other first-time home buyers.
Housing Trust Fund:
The House bill proposed a "housing trust fund" to support the creation of affordable housing and owner-occupied homes that would be financed not by taxpayers but by a set percentage of GSEs' annual profits. We support this provision and also suggest that Congress ensure that for-profit entities have equal opportunity to access monies from the housing trust fund to pay for activities directly related to the creation of affordable housing and homeownership opportunities for underserved communities and individuals. Additionally, NAHREP supports expanding access to the housing trust fund to support the renovation and rehabilitation of foreclosed properties to increase the availability of suitable affordable inventory.
Declining Markets
In response to the recent changes in the housing markets, deteriorating credit, increased risk and declining home values, the GSEs, lenders, and mortgage insurance companies have issued immediate changes to their guidelines for properties located in areas they have determined to be "Declining Markets". These changes include further expanding of risk based pricing, increasing post settlement delivery fees for loans perceived as riskier mortgages, revising credit and purchase requirements for mortgages with high loan-to-value (LTV) ratios, and providing guidelines for lender evaluation of collateral and market conditions. The policies are designed to result in safer loans in today's market environment.
Many advocacy organizations are concerned these policies will make home buying less affordable, and some have questioned the disparate impact of the policies on minorities and lower income areas. The challenge to the industry is determining a single definition of a "declining market" to avoid confusion by professionals in the marketplace regarding which policy applies and when. Lenders and MI companies all have variations of these policies as required by the GSEs in their guidance to them. Some have voiced concerns that some lenders may act unnecessarily cautiously when identifying communities as declining markets, resulting in too many properties being subject to significantly increased costs for delivering a loan to home buyers.
When FHA expands their market share as a result of increased loan limits and the adoption by Congress of FHA reforms, lenders and the GSE's may be tempted to move away from providing conventional lending for low to moderate and minority communities. Declining market polices may be used to drive low to moderate and minority community lending to FHA. These policies also have the potential to negatively label low to moderate and minority communities in general and whole neighborhoods within specific zip codes as areas where "government insurance" is necessary to obtain financing. If so, the unintended effect could potentially stigmatize these markets as areas for home buyers to avoid.
The GSEs growing concern of purchasing "other people's problems" will indeed impact their public mission and affordable housing goals, as commissioned based professionals find it increasingly difficult to obtain financing for home buyers in areas designated as declining markets. Lenders are increasingly more concerned about the GSE and mortgage insurance company policies and their impact on the ability to lend in certain markets.
NAHREP will continue to support expanding the rate of sustainable Hispanic homeownership by opposing measures that reduce or eliminate homeownership opportunities for underserved communities and individuals. FHA Modernization and Reform
NAHREP Advocacy:
The U.S. House and Senate have passed different FHA reform bills that include a number of changes designed to revitalize the Federal Housing Administration so that it can help more Americans achieve and maintain homeownership. NAHREP supports reforms that would give FHA the flexibility to develop and implement programs that better meet the needs of today's mortgage borrowers. While FHA programs have remained stagnant in recent years, conventional nonprime financing options have greatly expanded. As a result FHA volumes have declined significantly. Passage of the FHA Modernization Bill would be a significant step towards restoration of the viability of FHA loans as a home mortgage product. It is essential to sustaining and expanding Hispanic homeownership that the Federal Housing Administration (FHA) becomes more efficient and streamlined. Modernizing FHA will improve competition in the prime home loan mortgage industry and effectively assist the industry in combating abusive and/or discriminatory lending practices. FHA serves those who are not currently served or who are underserved by the private marketplace. FHA accomplishes its mission through private lenders using private capital at virtually no cost to the government. In fact, FHA annually sends funds to the U.S. Treasury, thereby reducing the deficit.
NAHREP's Position:
FHA modernization currently is being discussed in a House/Senate conference to resolve relatively minor differences in the two versions of legislation. NAHREP encourages leadership to finalize plans for a conference and to support the compromise legislation that comes out of that conference.
NAHREP believes that if enacted, FHA modernization will provide a potential solution for some homeowners struggling with their current loan terms and will help to further increase the nation's homeownership rate - especially among low- and moderate-income and minority families.
NAHREP believes that this will help to further increase the nation's homeownership rate - especially among low and moderate income Hispanic families, where a significant homeownership gap continues to exist today.
NAHREP supports simplifying the down payment process to offer borrowers a flexible down payment option. Additional NAHREP supports raising the FHA mortgage limits up to 100% of an area's median home price, and the flexibility to extend mortgage term authority to 40 years in addition to the current 30 years. Finally NAHREP supports modernization of the home equity conversion mortgage program. IMMIGRATION REFORM AND IMMIGRANT LENDING
Immigrants represent a vital growth segment for the housing industry. With baby boomers moving into their last real estate transactions there will be a huge void created by their pending absence. Immigrants will play an important role in filling this void, which will be a significant factor in keeping the real estate market vibrant in the future. Recent demographics show that there are more than 34.5 million foreign-born residents in the U.S. Of this number, 9.2 million or 30% are Mexican. The Hispanic population is projected to grow by 258% between 1995 and 2050 and Hispanic buying power in the U.S. will jump 89% between 2000 and 2008. In a study conducted for NAHREP by "The Immigration Policy Center of the American Immigration Law Foundation" released October 12, 2004, the Center identified the potential for purchases of affordable homes by more than 216,000 currently undocumented renter households to be $44 Billion in new mortgage originations. This study was based on 2000 data which likely makes the financial opportunity significantly larger today.
NAHREP's Position:
Harmonize Federal Regulatory Provisions related to ITIN Lending:
NAHREP encourages Congressional guidance in legislation for various Federal regulators to harmonize their respective regulatory provisions to provide clear guidance for banks and financial institutions for the use of ITIN's, the Matricula Consular, or other similar forms of identification issued by foreign governments.
Eliminate Required SAR's filings for valid ITIN holders:
NAHREP recommends eliminating the requirement of banks and financial institutions to file SAR's (suspicious activity reports) when they discover a historic use of an unauthorized Social Security Number by a customer now applying for a loan under a valid ITIN number issued by the IRS.
Don't criminalize financial education or other assistance to Immigrants:
NAHREP further opposes any legislative attempt to criminalize assistance to non-documented immigrants for purposes of purchasing a home, providing financial education, or consulting with immigrants regarding homeownership.
Family Unity and reduced backlogs:
NAHREP continues to support the concepts in Title VI to promote family unity and reduce backlogs by among other things, exempting immediate relatives of U.S. citizens from the 480,000 annual cap on Family-sponsored immigrant visas and reallocating the family-sponsored numbers; increasing the number of employment based applications per year, reallocating the distribution of those numbers, and providing for the recapture of unused numbers.
HUD Regulatory rulemaking and RESPA Reform
Today, the homeownership rate in the U.S stands at just over 67%; however for Hispanic Americans it is about 50%. This disparity is driven by a number of factors including the lack of competitive mortgage financing in those markets. In addition, NAHREP estimates that approximately 80% of Hispanic homebuyers are first time buyers - double the percentage of the overall market. Particularly for the first time buyer, the purchase of a home is both a complicated and emotional experience, which often creates a more labor-intensive real estate transaction for the real estate professional.
When it comes to purchasing a home, NAHREP members hold the position of a trusted advisor to many Hispanic consumers. NAHREP understands the real challenges facing Hispanic homebuyers. While NAHREP believes HUD's efforts to reform goals for RESPA are laudable, some of the previous proposals may create problems for Hispanic homebuyers and NAHREP members, most of whom are small businesses. Following are additional positions NAHREP has taken regarding RESPA REFORM:
NAHREP's Position:
The Enhanced Good Faith Estimate (GFE): HUD's previous proposal concerning the Enhanced Good Faith Estimate (GFE) results in "different treatment of compensation in loans originated by lenders and those originated by mortgage brokers". This unequal treatment will create an uneven playing field among mortgage originators and disadvantage mortgage brokers (many of them are Hispanic business owners) compared to mortgage banks and lenders. In effect, a mortgage loan originated by a mortgage broker- who already has additional disclosure requirements - may look more expensive to the consumer than an identical loan originated through a direct lender. Even though mortgage bankers and national banks do compensate staff for mortgage originations, under the proposed rule neither entity is required to disclose this compensation. As a result, a consumer could in some cases end up selecting a more expensive product by assuming that the loan with no disclosed compensation to the originator is always a better deal.
The Guaranteed Mortgage Package (GMP): NAHREP also cautions HUD to consider the impact to small businesses of the previously proposed Guaranteed Mortgage Package (GMP). It is possible that the GMP may in effect eliminate the opportunity of Hispanic consumers to select settlement services that specialize in working with Spanish speaking consumers. NAHREP supports the bundling of certain settlement services if in doing so closing costs are reduced and providing that specialty vendors that focus on minority consumers are allowed to participate as service providers within these packages.
HUD Regulatory rulemaking RESPA Reform (cont.)
Proposed Exemption of Section 8: Another major concern of NAHREP is the proposed exemption to Section 8 of RESPA. As you know, "Section 8 prohibits a person from giving or accepting anything of value for referrals of settlement service business related to a federally related mortgage loan. It also prohibits a person from giving or accepting any part of a charge for services that are not performed. These are also known as kickbacks, fee-splitting and unearned fees."
NAHREP is concerned that RESPA regulatory reform may create such a blanket exemption for mortgage lenders offering GMP that it could increase the real potential for unnecessary services and fees. This exemption would greatly and disproportionately impact minorities and first-time homebuyers, many of whom are Hispanic families.
Market adoption of non-traditional credit lending
Immigrant borrowers are often subject to higher rates and, perhaps, credit denial simply because there is limited data at the three national credit bureaus. This is the case even though many of these borrowers can demonstrate that they are creditworthy and have a solid track record of paying their rent, utilities, and other financial obligations.
At the same time, mortgage brokers and lenders are subject to added risks and time delays when they assist borrowers with little or no credit history. While automated underwriting has significantly improved the lending process, loans that require manual underwriting or that are based on non-traditional credit are faced with longer review periods and added scrutiny and may take on additional "reps and warranties." These added hurdles to the lending process work as a disincentive for lenders to reach out aggressively to these borrowers.
A recent study of 125 million consumer files demonstrated a more accurate and predictive method for risk assessment - including a reclassification of 21% of consumers out of subprime.
NAHREP's Position
NAHREP encourages the lending industry to adopt the use of automated non-traditional credit tools so that more borrowers with non-traditional credit can obtain homeownership: This is particularly critical to Hispanic borrowers that have recently immigrated to this country. Often these borrowers have the financial resources and income to purchase a home. However, because there is little or no credit history, they are not always treated equitably when it come to the mortgage lending process. Given the demographic shifts that are transforming our housing market, it is more important than ever to create a fair and efficient system to determine the creditworthiness of those consumers.
NAHREP is working closely with several organizations in pilot projects to expand the use of non-traditional credit tools that offer predictive models for assessing the true credit quality of non-traditional, thin file consumers.
A recent study of 125 million consumer files demonstrated a more accurate and predictive method for risk assessment - including a reclassification of 21% of consumers out of subprime.
These models increase the number of people that receive a credit score, and are proven to provide a better assessment of risk for the following consumer profiles:
- Thin files
- consumers who use credit infrequently
- Consumers new to credit markets
NAHREP encourages regulatory support for the use of these non-traditional methods of assessing credit quality for these worthy consumer groups.
