Alternate credit scores could spur buying. Home loans would be more accessible
BY GARANCE BURKE, ASSOCIATED PRESS

November 19, 2006

The slumping housing market could get a $200-billion boost from new immigrant home buyers if mainstream lenders start using alternative methods to score credit, a national group of Hispanic real estate agents says.

Creditors like Citigroup Inc.'s Citibank see recent immigrants as a growing market niche, but those who lack Social Security numbers or legal status in the United States often are rejected by the three major credit bureaus.

A handful of new credit reporting systems -- already used by 200 real estate brokers, community groups and mortgage counselors nationwide -- allow lenders to calculate risk by evaluating a prospective client's utility bills, rent checks and other payments.

Should the new reporting methods gain wider acceptance on Wall Street and among secondary mortgage lenders like Fannie Mae, housing markets with large Hispanic populations would stand to gain the most, the National Association of Hispanic Real Estate Professionals said.

"Gateway states like California and Texas will disproportionately benefit from the housing boom because so many of their residents are immigrants," said Gary Acosta, the association's cofounder, speaking earlier this month from the group's annual convention in Las Vegas. "Boosting homeownership among these populations is a positive contribution to the overall fabric of our society and our economy."

A study by the Joint Center for Housing Studies at Harvard University shows Hispanics will account for nearly one-third of the home-buying pool by 2010. That same year, the disposable income of Hispanics will exceed $1.08 trillion, or 9.2% of total purchasing power nationwide, according to the Selig Center for Economic Growth at the University of Georgia.

No law requires that buyers be in the country legally in order to purchase real estate, Acosta said. Citibank, for instance, doesn't require that borrowers be citizens or legal residents of the United States, Citigroup spokeswoman Janice Tarter said.

As with many other minority and immigrant communities, bringing Hispanic families into the mortgage market is a continuing challenge, say officials at Federal Reserve Banks across the country.

Community groups from California to Atlanta have begun offering financial education classes in Spanish as the number of mortgage products available to immigrants and underserved populations has grown.

The housing advocate ACORN Housing Corp. helps California clients secure loans by writing alternative credit profiles, which often draw on months of data from telephone bills and employment records. Once ACORN vets clients' financial stability, they send them to Citibank, which finances the home loans.

Fannie Mae and Freddie Mac require that borrowers for loans they underwrite be legal residents, but Fannie Mae accepts some alternative credit data.

"One of our most widely used products uses rental housing payments and utility accounts to underwrite loans for people who lack traditional credit records," said Cristina Miranda, a Fannie Mae spokeswoman. "We keep on looking at the impact that certain changes will have on the impact of minority homeownership."