Hispanic Mortgage Lender Out to Offer a Fair Deal

Leonardo Simpser has blunt advice for homebuyers considering a funny-money subprime loan requiring no documentation: Don’t!

“If you can’t afford to buy a house,” he says, “don’t buy a house.”

As managing director of the Hispanic National Mortgage Association (HNMA), a major new funding channel connecting Latinos and other communities with Wall Street and the global capital markets, Simpser finds himself holding a key position in the American home mortgage market.

Hispanic first-time buyers not only constitute the fastest-growing segment of the market, but they are also among the most vulnerable to a shady subprime lender or mortgage broker.

Many Latinos, especially recent immigrants, have low FICO credit scores - or no scores at all - and appear to be less creditworthy than they are in reality.

Loan officers often don’t look past credit scores, which are likely to be artificially depressed because of the applicants’ nontraditional credit histories.

If they want to buy a house, applicants are told, the only way is to sign up for a subprime, or bad credit home loan, with high fees, payment-shock rate resets and crushing prepayment penalties.

San Diego-based HNMA, which has joint funding relationships with Deutsche Bank and Wells Fargo Home Mortgage, exists to “change this pattern and produce better products and results” for Latinos and others who get raw deals under the current system.

The company’s research and development division, for example, has created the first culturally sensitive electronic application evaluation system - the Hispanic Automated Underwriting System, or HAUS.

The system enables a home loan lender to see through non-traditional credit and income patterns quickly and give necessary weight to one’s on-time payments in rent, phone bills, utility accounts and a variety of other credit indices.

HAUS also eliminates the need for time-consuming manual underwriting of nontraditional applicants and allows a mortgage company to underwrite a borrower with no Social Security numbers and multiple income sources.

Virtually all of HNMA’s customers traditionally would have ended up in the subprime market, taking out mortgages that now have delinquency rates of 14 percent or higher. Yet with a year’s worth of production, HNMA’s early delinquency rate “is zero,” Simpser said, “and foreclosures are zero.”

SOURCE: Detroit Free Press