How you can help the Hispanic demographic prep for homeownership

In our latest episode we chat with Maria Vergara, Director of Community Lending at Fannie Mae. She uncovers why you should be paying attention to the Hispanic demographic (if you want to stay in business, that is). She also discusses how homebuyer education can help Hispanic borrowers understand their down payment options as well as the homebuying process, and how her own cultural background has played a big part in her transformational role at Fannie Mae.

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Transcript

Concepcion:
Welcome to Mortgage Connects by MGIC bringing you the latest insights from top mortgage professionals around the industry. I'm your host Concepcion Guerrero. Today I'll be talking to L Maria Vergara, Director of Affordable Housing and Lending Equity at Fannie Mae where she's part of a team that oversees the execution of Fannie's Mae duty to serve in affordable housing goals. She's also an integral part of the housing equity working group with Fannie Mae that strive to narrow the gap of racial and wealth inequalities in the housing industry. She has over 20 years of experience and in-depth knowledge of the financial, investment, and housing industries while serving in senior management roles at organizations such as Citi, Prudential, Wachovia, and Edward Jones and NAHREP consulting services. Maria holds a Bachelor's degree in International Relations and a Master's degree in Marketing, and recently completed a program in Diversity, Equity and Inclusion from Northwestern University. All right, Maria. Welcome, bienvenida, glad to have you join us today.

Maria:
Hello. Thank you. Glad to be here.

Concepcion:
Well MGIC is celebrating Hispanic Heritage Month, so I want the focus to be really on this specific demographic and in many conversations I've had with other Latino professionals, we like to use Latino, Latina, Latinx, Hispanic, all of these different words that really refer to us. But can you explain it really what the difference between these terms is, and is there really a right or wrong way to use them?

Maria:
Yeah, so that's a common question. I think it's an important question because when people aren't comfortable and think that they're going to say something wrong, then they may refrain from even approaching the topic. So it's an important clarification. So Latino and Hispanic are what we traditionally have used to describe people of Hispanic heritage and what is on the census. And really specifically Hispanic refers to those people, Spanish speaking descent, and versus Latino, which would include Brazil. And as, as we know that they speak Portuguese. Either, or is, is is acceptable Latinx just recently has started taking shape and is being used more and Latinx is more of an inclusive and gender neutral description that you might recall in our foreign language classes in high school or college, the romance languages are very gender focused and Latinx would be more of a gender neutral and inclusive. So, you know, either one is, is accepted. Latinx is still newer description. I think the important thing is to to ask and to not shy away from any topic, because we're afraid that we're going to do something wrong.

Concepcion:
Right. And they're really, I would say isn't you know, if someone uncomfortable, it's just plain out, you know, ask, "would you like to be preferred as a Latina and Latin X." You know, as a, as a Latino woman, I've had individuals come up to me and say, would you prefer that I refer to you as Latin X or Latina? And, you know, I'm honest, I really have no preference. I'm not offended if you use one or excuse me, one or another. So-

Maria:
Right, exactly. I I'm right there with you. I personally prefer Latina as a general description. But I think you might agree when it comes to those within the demographic itself, we often defer to country of origin. And so I'll many times say Mexican American myself. So those terms are more when we're talking broader segments and like you said, it's not offensive either way, but it's important to know what the differences and what the origins are,

Concepcion:
Right. Thank you for clarifying that Maria. Now you have an extensive experience when it comes to working with the Hispanic community. What would you say sets this demographic apart from everyone else? What really makes them unique?

Maria:
I'd say actually two things the size of the demographic and the age, but the size of the US Hispanic population is is amazing. One out of five, excuse me, people in the U.S. are of Hispanic descent. So 20% population. And if you were, if you would take the U.S. Hispanic economy and extrapolate that and make it its own economy, it would be the GDP, or the gross domestic product of that economy, would be in the top 10 countries. I think it's like close to Brazil actually. So it's just a huge demographic. It's so young as well. You have almost three quarters of that population that's millennial. So, we hear a lot in our industry about the millennial focus and companies wanting to capture more of that millennial market share, but really when it comes to Latino, Hispanic community, it's really one in the same. It's a very young, large demographic. And also to put into context, it's the largest consumer group to emerge since the baby boomer generation. So I'd say that's what makes it unique is just the size and the youth of the segment.

Concepcion:
Perfect. And I think that ties into, and that reflect into the Hispanic homeownership rate as well. You know, we're the only demographic to have increased the home ownership rate consistently over the last seven years. So I think it's clear to say that we're definitely a force to be reckoned with. What advice would you give to lenders that aren't currently focusing in attracting or working with this powerful demographic?

Maria:
I would say only pay attention to the segment if you want to stay in business and if you don't want to stay in business and ignore it. No, just kidding. So I'd say you know, it is, it's just, it's like, why would you not as a company be focused on either the consumer segment or recruiting into your company from the demographic, but yeah, you have a huge segments. We just talked about a huge population that's coming into purchasing yours, home, buying, purchasing yours. And so if already, as you mentioned, it's still, it's the only demographic to have increased home ownership right? It's not, there's still a lot of gaps between actual home ownership and between whites, Hispanics, and whites and blacks in the U.S. But it's the only demographic where that rate is consistently been going up year over year.

Maria:
And as you have, you know, this millennial group coming into their own home buying years it's just gonna boom. And that's, what's fueling the economy. So I'd say a couple of things with that though, is I often I see some companies make the mistake of treating it like a homogeneous segment or like all as one. Yes, for the most part, you've got Spanish as a common denominator culturally, but I think that that thought prevents companies from going all in, because they're afraid of the language or perceived language barriers. And what's really important to understand is most of the US Hispanic population growth is coming from native born families not, not immigration. So I was born and raised in Chicago of Mexican parents, but consider myself Mexican-American Hispanic, right? And most of the growth coming from you as Hispanic is native born. So therefore language is not really an issue. So some might ask a question, "So if you're born here, what makes that different?" And what makes it different is the culture. And really the lack of financial experience from a generational knowledge gap, because folks like myself we are first generation, so our parents were here, but have the experience a lack of knowledge from their past. And that's gonna take a couple of generations before that equalizes. And so we need as companies, as an industry, we need to address that and make sure that we're providing the education, the outreach, the cultural nuance, that's necessary to talk to folks like us. So that's the main difference.

Concepcion:
Yeah. And as you mentioned outreach and kind of a lack of knowledge that a lot of the times lenders that are going to be working with the Hispanic demographic, they really are going to be doing a lot of training. When it comes, you know, a lot of education, a lot of walking them through kind of the home buying experience and the overall picture. So I guess what would you say to loan officers that are focusing or would like to really dive into or start attracting this demographic? What would you say would be the top things to keep in mind when working with the Hispanic community when doing business?

Maria:
Like you said, definitely the, the education is huge. So not so much education on product knowledge where I think the industry gets hung up on, it's more the process. What are the things that we need to prepare for that journey of homeownership? Whether it's knowing where all of your documents are. That's a big hang-up for people is they don't know, you know, what information or what documentation that they will need to get pre-qualified or to qualify for the actual credit underwriting of the loan. What are the things that you might need to prepare for home ownership and emergency funds? What are down payment options? Unfortunately, unbelievably, many people still believe they need 20% down payment, which is not true. You can get into a home for as little as 3% down if not less than some with some other products, but it's, you know, it's an education on the process what's available down payments, a big barrier. What happens you know, after you close a loan, a lot of folks spend it's a very emotional purchase. And so as you go through the whole process of buying the loan, you get very close to that loan officer, because you basically told them your whole life story, but then many times after we closed the loan, that loan is sold to a servicer. And many people are surprised at that, or, you know, what happened to that person that I had a relationship with. You know, so that's important. So I think education from pre mortgage during mortgage, after mortgage is important, the knowledge of down payment assistance programs, what we need to do to repair credit and, you know, for the Latino segment as a whole, we actually have very good credit. If you look at it in general, an aggregate it's many have the issue of not enough credit and that's different. So you know, talking about that generational knowledge gap, I remember personally having my father tell me if you don't have cash, you don't buy it. And which is a good I think holistically is a good approach, but there is such thing as good credit and bad credit, right? If you put, you know all the time on your credit card, it's probably not good credit, but if you you know, had a small investment that you needed to take some money out to, to to provide for, you know, that would be good, good credit. I think we need to understand you know, the difference between good credit, bad credit and credit scores and building that.

Concepcion:
Thank you, Maria. Now, are there any organizations that you would recommend mortgage professionals check out if they're interested in learning more about this specific demographic?

Maria:
I would definitely, I would be remiss not to mention NAHREP. NAHREP is the National Association of Hispanic Real Estate Professionals. That's where you and I met many years ago. It's the largest minority trade organization in the U.S. It's a wonderful organization. There's lots of other great organizations for advancing the Latinos and housing industry MBA, the Mortgage Bankers Association, has over the years done much more to focus on diversity, equity and inclusion, and do a lot more in this space. NAAMBA, National Association of Minority Mortgage Bankers of America is another great organization. So there are a lot. I think the important thing is to get involved, maybe it's even just the local chamber of commerce, you know, where you are. It doesn't have to be these national organizations. It could be something at a local level, which I think could even, there could be an argument that getting involved locally or in a local level is even more effective than, than doing something nationally. But, you know, there's a will, there's a way I just, you know, get involved as questions and look at what's available in your area.

Concepcion:
Okay. Thank you, Maria. Now, Fannie Mae is a very well recognized throughout the industry, without a doubt, but what what work would you say they have done that has supported the diversity and inclusion efforts within the mortgage industry?

Maria:
So Fannie Mae absolutely is recognized, I will say a lot of times when I'm in the industry as they're talking to people, surprisingly people think Fannie Mae originates loans, and we do not. You know, we, our mission has always been to provide liquidity and promote stability in the housing market. So we're purchasing the loan from originators. But you know, we have a big influence on programs, on products, on the rules of engagement. So that's a very big responsibility that Fannie and Freddie have in the industry and to keep things moving and flowing. So we also know that people of color, especially Black and Hispanic Americans have really lag behind white homeownership and it's for a myriad of reasons. But when you're looking at like a 30 percentage point difference between Black and Hispanic and white households, that's huge. And that equates to millions of fewer households, millions. And if you extrapolate that to families and everyone affected, millions and millions of folks that that's really impacting. And this gap unfortunately has been, has remained steady, if not not gotten worse, for decades and that can come from lots of different reasons, but unfortunately there's been a lot of historically biased policies that have gotten us there. So the things that we, as I said, not being lended, but can have an influence on that. Fannie feels is like main pillars to this is advancing education. I talked earlier about education before the process, education, during the process and education after to avoid any foreclosure and those types of events. We need to look at more inclusive credit evaluation. We need to limit the loss on the backend. So getting people into sustainable home ownership is very important. And then also increasing industry representation. And I'll talk a little bit in depth about two of those. But this past week we introduced, Fannie introduced positive rent payment. And so you know, what that is it's helping many renters, specifically low income renters go from renting to owning a house by overcoming a big obstacle, which is qualifying for a mortgage when you have insufficient credit history. I mentioned earlier, insufficient is not the same as bad credit history. And so last week, Fannie Mae introduced this enhancement to Desktop Underwriter, and it allows lenders to consider the history of recurring rent payments in assessing the eligibility of that renter to be a home buyer. So obviously if they're paying rent on time, it's really highly likely that they're going to pay their mortgage on time as well. And so we feel that that's a really important step to large-scale changing, you know, the, the, the system to to help consider positive right payment, to help people qualify for more loans. So that's a huge leap forward in the right direction, in a really positive way of looking at credit in an innovative way and a more inclusive way. And then you might've heard of Future Housing Leaders, and this is a program that Fannie Mae has been committed to for the last couple of years. And it's led by my colleague, Marcus Cole at Fannie Mae. And it's really it's a proprietary program only Fannie has it. And its main goal is to increase the industry representation of young and diverse talent. Like I said earlier the segment of both Black and Hispanic are mostly millennial. So it's just a huge talent. And then we have, as you probably know, a big issue in our industry of being an aging, mostly white male industry. And so, you know, how are we going to address the void of professionals in our industry? And so you know, one way of doing that is increasing that representation. And so it's a free program and any company they don't have to be a customer Fannie Mae and they don't even have to be a lender. So any company can reach out to us and access the database that we've created over the last several years and be connected to either recently graduated or soon-to-graduate individuals for opportunities to intern or to hire in their company which is a phenomenal service. And then it also provides a curriculum, which is really important. We talked about, you know, that generational knowledge gap and, you know, how are these young people knowing about this industry when, you know, they didn't come from a long line of mortgage professionals. So it's important to educate and expose them to concepts of our profession that offers a curriculum. And of course the networking, which is important because if you don't see people like you then it's hard to envision yourself in that position. So networking is really important. So that's future housing leaders and examples of two things that we're doing.

Concepcion:
So for the Future Housing Leaders, is this something that interested individuals can go on there on your website and sign up for?

Maria:
Yes, both, both either individuals could get in contact with Future Housing Leaders on our website and they can submit their resumes for consideration in the database. But equally important is this database is matched to companies that are looking for people. So yeah, either, either way is possible either from the individual perspective or from the lender perspective, the future housing leader team does a lot of outreach at historically Black universities or Hispanic universities and are connected with like a who or other organizations where they generally get the resumes. But certainly we wouldn't turn anything away.

Concepcion:
Excellent. Thank you. Sounds like an amazing service and opportunity for those to participate in programs like this. Well, like I mentioned earlier, Maria, we're celebrating Hispanic Heritage Month here at MGIC, and I know that you're at Latina. So would you mind sharing with us a little bit about your cultural background and how that played a role in your career?

Maria:
Sure. So, number one, I'm so lucky to know people like you and other Latinos in the industry. You know, that I'm Latina, because we've had the privilege to meet several years ago and work on some projects and we've stayed connected, which I think is one of the best outcomes of, of being in this industry for as long as I have is you grow some pretty great relationships. You know, I'm the youngest of four, my parents are from Guadalajara, Mexico, and they came to the U.S. in the fifties. And that was a time of a lot of issues, civil rights issues. And it wasn't only isolated to Black Americans. It was, xenophobia in general people, you know, foreigners and people that they, if they wanted to exclude they could, and it was permitted by law at that time. So it was an interesting time for my parents to be in the U.S. and being the youngest of four, I didn't see as much of the turbulence as my older sisters, there's a 13 year difference between us. But certainly the, the experience last for generations, but I always thought I wanted to grow up and be a diplomat. That was my end goal. And I think I wanted to do that because I had a desire, always had a desire to bring people together and kind of find common ground build bridges. That's kind of how I view myself and approached life. When my father passed away, he passed away fairly young, you know, he was in his early sixties now that I've reached the half century mark. I look at that age only very young and it left my family in a terrible financial situation. And simply just because he didn't know what he didn't know, right. He was a Mexican immigrant hard worker. But you know, we have to stop working so hard and start working smarter too. And I don't mean that as a mark against him, he did his best, but it was just an example of how not knowing literally cost us everything. And you know, that really changed my my whole journey, my whole professional journey, because when that happened I got into financial planning, actually, at the time. And so I did, I went out into the community and I would speak to everyone. I saw my father's face in everyone that I spoke to about planning, about insurance, about investing, about home ownership, anything related to any of those wealth building and wealth saving thoughts and options. So it changed everything. And I think, you know, did I become a diplomat, I think? Yes, I did. I became a financial ambassador or financial diplomat to my community, and I'm here more than 25 years later, I'm still doing it. And I find this to be the most gratifying career because we help people and we can really make a difference. So I love what I do and I've been very fortunate to be able to do what I do and also incorporate my culture that I love so much.

Concepcion:
Thank you for sharing that, Maria. I know as another Latina, I'm a younger Latina, it's always nice to connect and really learn and get inspired by Latinas like yourself that have grown and have succeeded within the mortgage industry. So I appreciate your time. I appreciate your knowledge and sharing your experience here with us today. Is there anything else that you would like to share with our listeners?

Maria:
I would say please check out our Fannie Mae website. I talked about you know, the positive rent payment that could help a lot of first-time home buyer renters out there. So if you're not familiar with that, you know, please check that out. The Future Housing Leaders to increase talent in the industry. We so need it. We need more, more people to represent the growing community. We have Your Own Story, which is a great marketing campaign that you can brand as your own. It doesn't have Fannie Mae logo on it. And there's lots of great social media clips in there that you can start using to promote education. It's, it's really intended for that first piece that I talked about of educating folks on what you need before the process, during the process after. So that's something else to check out, but there's many things that have been recently introduced in the market that I think are really value added.

Concepcion:
Excellent. Thank you. Well, Muchas gracias, Maria, for your time today. I appreciate having you on.

Maria:
Thank you so much.

Conceppcion:
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