Volume 3 Number 8
September 2006

In this Issue
Lean Production Techniques May Advance Factory-Built Housing
Examining Hispanic Homeownership
Homeowners: The Last Defense in Preventing Moisture Damage
When Low-Income and Minority Families Buy Their First Home

Examining Hispanic Homeownership

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Hispanic homeownership increased at a greater rate than that of non-Hispanic whites during the last decade (11 percent and 6 percent, respectively), yet considerably fewer Hispanics own homes. The home-ownership rate for non-Hispanic whites is 76 percent, compared with only 50 percent for Hispanics. What explains the difference in homeownership rates? What barriers do Hispanic families confront when they want to buy a home? Is help available for overcoming these barriers? And what measures would most likely lead to an increase in Hispanic homeownership? A timely set of seven reports from HUD's Office of Policy Development and Research looks at these questions.

At the core of these reports is a review of available research on Hispanic homeownership. The review found that, to understand what fuels the lag in Hispanic homeownership, one must recognize the diversity of the U.S. Hispanic population. Variations in ethnic and socioeconomic background, geographic location, and length of stay in the United States are significant. In-depth case studies of Hispanic communities in Washington, D.C.; Orlando, Florida; and San Antonio, Texas underscore the diversity of the U.S. Hispanic population. The accompanying table presents statistics that reflect a few of the differences in the Hispanic populations of these three communities and the country as a whole.

Each community has a unique demographic profile that influences Hispanic homeownership rates. This research points to an array of significant contributors that include age, income, level of education, net worth, household type, nativity, country of origin, degree of social integration, and place of residence. The authors of these reports recognize that other influences, such as discrimination, also shape Hispanic homeownership levels.

A seminar held at HUD in June examined Hispanic homeownership in the United States.

Common Barriers to Hispanic Homeownership

Despite variations within the Hispanic population, the research finds common barriers to homeownership that are especially difficult for immigrants. One such barrier is a lack of accurate information about buying a home and the roles that real estate agents and financial agencies play in the process. Limited English skills, a disconnect from mainstream financial institutions, and bad experiences with banks in other countries discourage many from pursuing homeownership or contacting housing counseling agencies.

A disproportionate number of Hispanics have low levels of income and wealth, poor credit histories, unstable employment, and inadequate documentation. This means that many do not have access to housing finance, particularly in high-cost markets where decent, affordable homes are in short supply. According to the case studies, many Hispanics prefer to rent in predominantly Hispanic neighborhoods than to buy a house they could afford elsewhere.

Compiled from: Efforts to Improve Homeownership Opportunities for Hispanics: Case Studies of Three Market Areas and Improving Homeownership Opportunities for Hispanic Families: Language, Agglomeration, and Hispanic Homeownership. U.S. Department of Housing and Urban Development, Office of Policy Development and Research, March 2006, pp. 7–14, 37–43, 63–70.

As the case studies emphasize, many Hispanics cannot meet underwriting requirements to qualify for mortgage financing. During the past decade, three of the most common sources of residential mortgages - Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA) - made changes that standardized mortgage products and helped low- and moderate-income households qualify for mortgages. However, underwriting requirements still present obstacles to many Hispanics. Some of the more common ones include:

• Requiring borrowers to be legal residents of the United States. This remains a barrier for millions of undocumented immigrants. Although some lenders are assessing this requirement, it involves issues that remain difficult to resolve.
• Disallowing cash income. Some smaller community mortgage lenders now allow a limited portion of a borrower's total income to be earned in cash. Fannie Mae, Freddie Mac, and FHA may follow suit in the future.
• Requiring homebuyer education and counseling in order to qualify for new flexible mortgage programs, such as Fannie Mae's MyCommunity Mortgage. This is a relatively new requirement; however, it is one that sometimes impedes Hispanic homeownership when counseling and materials are unavailable in Spanish.

Strained Homeownership Services

To navigate the process, most prospective Hispanic homebuyers need a wide range of information and services. The demand for credit, mortgage, and post-purchase counseling; for assistance in building English proficiency; and for help in establishing legal residency is straining the capacity of providers. Although housing counseling agencies offer the most comprehensive range of services, including group seminars and individual counseling, few offer one-stop centers. As a result, prospective homebuyers must cobble services together for themselves. For example, one agency may offer homeownership counseling but refer clients to a real estate agent to find a house, to another agency for downpayment assistance, and to yet another to find a mortgage. This fragmentation leaves many prospective homebuyers discouraged and vulnerable. A number of agencies also report that limited resources often keep services out of reach for many moderate-income Hispanics who would make excellent candidates for homeownership. The same can be said for criteria that require clients to earn between 50 and 80 percent of area median income.

These reports will be useful to anyone interested in understanding the barriers that Hispanics face in the housing and mortgage markets, and in learning more about public and private initiatives aimed at increasing Hispanic homeownership. All seven reports and a separate summary can be downloaded from the following websites, or ordered for a nominal fee by calling 800.245.2691 and selecting option 1.

• Improving Homeownership Opportunities for Hispanic Families: A Review of the Literature (http://www.huduser.org/publications/HOMEOWN/hisp_homeown1.html).
• Efforts To Improve Homeownership Opportunities for Hispanics: Case Studies of Three Market Areas (http://www.huduser.org/publications/HOMEOWN/hisp_homeown2.html).
• Review of Selected Underwriting Guidelines To Identify Potential Barriers to Hispanic Homeownership (http://www.huduser.org/publications/HOMEOWN/hisp_homeown3.html).
• Housing Tenure, Expenditure, and Satisfaction Across Hispanic, African-American, and White Households: Evidence From the American Housing Survey (http://www.huduser.org/publications/HOMEOWN/hisp_homeown4.html).
• Mortgage Pricing Differentials Across Hispanic, Black, and White Households: Evidence From the American Housing Survey (http://www.huduser.org/publications/HOMEOWN/hisp_homeown5.html).
• Improving Homeownership Opportunities for Hispanic Families: Language, Agglomeration, and Hispanic Homeownership (http://www.huduser.org/publications/HOMEOWN/hisp_homeown6.html).
• Homeownership Rate Differences Between Hispanics and Non-Hispanic Whites: Regional Variation at the County Level - Empirical Studies (http://www.huduser.org/publications/HOMEOWN/hisp_homeown7.html).
• Summary of HUD Research Series: Examining Barriers to Hispanic Homeownership and Efforts To Address These Barriers (http://www.huduser.org/publications/homeown/hisp_homeown8.html).