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Customizing Lending to the Hispanic Community

 

October 8, 2020

Kristin Miller Welcome to Ask the Expert, where we ask industry leaders about their unique perspective on how to navigate the most difficult challenges faced by the broader real estate and financial services ecosystem, and also give you guys a chance to ask the expert some of the most pressing questions on your mind.

My name is Kristin Miller, and I am Head of Service Strategy here at States Title. Today, I’m excited to welcome Frank Fuentes, the National Vice President of Multicultural Community Lending at New American Funding, to talk about the topic: “Customizing Lending to the Hispanic Community.”

A couple of notes about Frank. Frank joined the New American Funding family 20 years ago in order to help launch the company’s internal inside call center, specializing in servicing the needs of the Hispanic market. He was the first Latino and bilingual loan officer hired at New American Funding, and his dedication to making a change in the community quickly earned him number one loan officer within the company.

And then lastly, Frank is still very much active in loan origination within the company in his role as Vice President of Multicultural Community Lending, where he works hand-in-hand very closely with the co-founders, both Patty and Rick Arvielo, on everything related to increasing homeownership within the Hispanic market.

Without further ado, welcome, Frank!

Frank Fuentes Thank you, Kristin, thank you so much for that warm introduction. Happy to be here. Happy to share my experience with your audience and frankly all the success that we’ve had and that I’ve had as an originator and that New American Funding has had as a major top 10 mortgage company in this country within the Hispanic demographic. So, yeah, happy to be here and happy to start sharing some golden nuggets.

Kristin Miller Yeah, we’re super lucky to have you. It’s such a timely conversation. And so thank you for taking the time. Let’s just get into brass tacks and start asking the questions.

Frank Fuentes Absolutely.

Kristin Miller So, Frank, as you know, it’s Hispanic Heritage Month, and I’m sure that is super close to your heart, and what you live and breathe every day. You’ve worked with some great lenders and made an impact, obviously, in your professional life, and that jives perfectly with your personal desire to help your community. Could you talk to us a little bit about your background, how that shapes the work that you do, and how ultimately that’s brought you to where you are today?

Frank Fuente Sure. So as far as my background, like many other mortgage professionals or mortgage veterans, I should say, in the industry, I basically stumbled upon the mortgage business. I stumbled upon New American Funding. I actually found New American Funding through a throwaway newspaper. So 20 years ago out in California, there was something called the PennySaver.

Kristin Miller Yes! They had a great theme song. I will definitely not sing it now. But if anyone wants to Google it on YouTube.

[Both Laugh]

Frank Fuentes So PennySaver was a throwaway newspaper where people would buy classic cars, used cars, puppies for sale, stuff like that. And there was a small section for employment ads. So I think one day I was looking through that paper and I was actually looking for a puppy, for a little Rottweiler puppy back then. And I saw the ad and I had recently gotten my real estate license, but I just didn’t know what to do with it. I mean, I just took the coursework, passed the test. I was like, okay, well, now what do I do? Again, with a real estate license, nothing to do with mortgage. So I saw the paper and there was a three-line ad that said: “Make $10k a month. No experience necessary. Must speak Spanish.” And I was like, this is all me – I want to make $10k a month, I speak Spanish, and I’ve got no experience. Perfect.

Kristin Miller Great, submit the application!

Frank Fuentes I called and the owner, the CEO of New American Funding picked up because it was his cell phone. Back then, New American Funding was a seven-person operation. Seven people. Now, fast forward to 2020, there’s 4,000-plus. So anyway, I called, showed up for the interview, they drilled me with a bunch of ethical questions. “You’re going to be dealing with people’s finances. How do you feel about this? How do you feel about that? How do you feel about working long hours, 10 or 12 hours a day, sometimes?” I was like, for ten thousand a month, no problem, I’m in. And that’s pretty much how I got started.

And then from there I immediately went into the sales side. I had no sales training. No sales mastery. No Tony Robbins. Nothing like that. So I just learned sales as I went. And to this day, I mean, I really don’t feel that I’ve ever been a salesperson. I’ve always taken more of an educational approach. From day one, I just was talking to people over the phone, explaining the process, being honest, being fair, being ethical, and just educating them on what a purchase loan was, what documents are required, what a refinance is, and just being the educator, especially with Hispanics. And just like you said in my bio, that strategy or that tactic led me to be the number one loan officer for a long time, almost a decade.

I really don’t feel that I’ve ever been a salesperson. I’ve always taken more of an educational approach. From day one, I just was talking to people over the phone, explaining the process, being honest, being fair, being ethical, and just educating them on what a purchase loan was, what documents are required, what a refinance is, and just being the educator, especially with Hispanics.

Considering that a lot of people in the industry consider Spanish speaking clients the most difficult to work with, because of the Spanish barrier, because of the cultural differences. So people in the industry know that dealing with Spanish speaking borrowers is far more challenging, compared to your traditional English-speaking borrower, tech-savvy, online, on e-mail. Those are going to be a little easier when it comes to processing the loan versus the Spanish-speaking demographic. But I was able to master it just through taking an educational perspective on originating, if that makes sense.

Kristin Miller It does. That’s super helpful. Any specific nuggets of wisdom there where – your obviously like background and growing up and who your family is? What do you think you took from, say, your childhood, and also, through your education? And furthermore, where you think somebody else, like very much within your position, it’s one thing to be as successful as you are, because you are, that somebody could take from that adds a learning experience?

Frank Fuentes I think what’s important, and you and I talked about this earlier this week, is being culturally keen. And what I mean by that is making an effort to understand, especially talking about Hispanics, making an effort to understand the different – you could even call them subcultures – that live under the Hispanic umbrella. Right? It’s going to be a different conversation with Hispanics or Mexicans in California versus Puerto Ricans in Florida, or even the Mexicans in Texas compared to the Mexicans in California. It’s a different conversation. Different words are used in many cases, different ways of conducting business, believe it or not.

So it’s very important as a real estate professional or mortgage professional to understand those cultural nuances that exist within the Hispanic market, because it’s super important for building trust, for building rapport, and to effectively communicate and engage with those communities. So it’s very important to make an extra effort to learn those nuances.

And I learned very early on, believe it or not, I learned to recognize for the most part what part of the world the Latino borrower was from just over the phone. Because you’ve got to remember, during those 10 years, it wasn’t a lot of face to face. It was small. It was building the rapport over the phone. OK, first of all, that’s pretty challenging alone. Once you throw in the Spanish and the Hispanic piece of that, Hispanics are probably the most skeptical type of borrowers there are out there, with good reason, because of the culture in the countries where they come from. There’s a lot of fraud. There’s a lot of bribery going on. There’s a lot of shady business going on and a lot of these countries in Mexico and Central America, in Colombia.

So when you’re talking to these borrowers over the phone, they’re super skeptical. To be able to build the rapport and gain their trust, it takes a keen understanding of their culture. I would say, it took me a couple of years, but I started to recognize just by the accent in their voice, by their accent, by the words they used, I can pretty much figure out, OK, this borrower is Columbian. This borrower’s Cuban. This borrower’s Puerto Rican. This borrower is from a certain part of Mexico. They’re from northern Mexico. They’re from central Mexico. They’re from southern Mexico. So there’s a lot of nuances there that are super important to recognize if you truly want to capitalize on this market.

Kristin Miller That’s so interesting. I mean, obviously, it’s probably self-evident to you and anybody else in the Hispanic community, right? Like, not everybody fits within this box, right? Not everybody that’s Hispanic comes from the same culture and/or geographic place in the country. That’s really interesting. I’d love to get into that.

So, Frank, what is the importance of marketing and technology when it comes to engaging the Hispanic market? And with the keen eye that not all Hispanics obviously fit into a box – they come from very different cultural backgrounds and different countries – how important it is to you to simplify, and also probably more importantly, localize the mortgage process to this community? What misconceptions do you often – and maybe your borrowers too – what misconceptions do you often see here?

Frank Fuentes Sure. Well, the number one misconception is that, and I’m going to generalize, but I think most companies in the industry, whether the real estate companies or title companies or mortgage companies, they sometimes think that just by having collateral in Spanish that they’re pretty much done with checking off the mark on marketing to Hispanics, right? And that’s a huge misconception because, yes, there are 60 million Hispanics in America right now. 60 million. But out of those, five million, they are Hispanic millennials and Hispanic millennials are probably the prime home-buying candidate that exists in America today. Not only are they young, their average age is about 29, 29.5 years old. Prime homebuyers, they’re educated, and a lot of these Hispanic millennials don’t even speak Spanish. They actually speak English. I mean full-blown English. I mean, very little Spanish, and some don’t even speak Spanish.

…the number one misconception is that, and I’m going to generalize, but I think most companies in the industry, whether the real estate companies or title companies or mortgage companies, they sometimes think that just by having collateral in Spanish that they’re pretty much done with checking off the mark on marketing to Hispanics, right?

So the message there is recognizing that and adjusting your outreach, your strategies on social media, for example. All your messaging, and I’ll just give you a couple of examples, has to be, it has to be in English, but with a cultural twist, whether you incorporate music, whether you incorporate food. But it has to have a cultural twist with English messaging. So that’s just scratching the surface on what has to be created or thought about when you’re creating content to market to this burgeoning and super important demographic being the Hispanic millennials. Because at New American Funding we’ve done a ton of research. I’ve done probably about 30 presentations on Hispanic millennials, pre-COVID, across the country, and have created tremendous engagement from realtors, from loan officers, from the industry as a whole. Our company has actually coined the term ‘Hispennials’, meaning Hispanic millennials.

Kristin Miller I love that. Can you say that again really quickly, for the audience, because I think that’s a key term.

Frank Fuentes So among Hispennials, as we know, social media is super important. And it’s very important to really dig into the data as far as what platforms these Hispanic millennials are using. A lot of them are still using Facebook, very high adopters of Facebook, but now they’re shifting over more to Instagram. So that’s important. They also show that Hispanic millennials are spending more time on mobile than any other demographic. They’re spending almost twice the amount of minutes on mobile versus any other demographic. So any type of marketing, websites, whatever you want them to do, it had better be on mobile. Your websites had better be mobile optimized, because that’s where they’re at. They’re there. They’re not on their laptops.

Along with mobile, video. Hispanic millennials are some of the highest consumers of video content. So if you want to reach them and you want to make sure your message is effective, you’d better be using video and you’d better be using a lot of it. And that video has to have a cultural twist, just like I mentioned earlier. Maybe throw in some Spanglish in there. But even though your messaging is 100 percent in English, it has to have that cultural twist. And on top of that, being keen to the area of where that video is going to be shown. Hey, if it’s going to be shown to Puerto Ricans in Florida, it’s going to look different compared to the messaging on that video that’s going to be shown maybe to Hispanics in Texas, in Dallas, or in El Paso. Different markets, different types of Hispanic.

Kristin Miller I’d love to know, just really high level, how the differentiated marketing to maybe a Cuban in Florida vs. an Hispanic in Texas would look. How do you kind of delineate your marketing campaigns or maybe your sales calls?

Frank Fuentes It’s all market-specific. Obviously now we have A.I., artificial intelligence. We’ve got tons of data available at our fingertips. So it really just comes down to doing the research. It’s very regional that you need to understand and know what percentage of Hispanics in the target market are of Mexican origin, Puerto Rican origin. I mean, we know pretty much by default – I mean, at least we do – that certain parts of the country, we already know what the highest percentage of the individuals there are.

So, for example, let’s take Chicago. I can tell you that the majority of the Hispanics in Chicago are Mexican. And I can tell you that the majority of those Mexicans are from a state in Mexico, which is Michoacán. So that’s really drilling down into the demographics and really having a detailed market study and understanding of that market. So knowing that, we definitely know what strategy to incorporate to penetrate in that market. Same thing with LA. Same thing with Texas, Florida, which are some of the main hubs for Hispanics. So market research, artificial intelligence, data. It’s all there.

And the other thing I want to highlight is you should have this report, the State of Hispanic Homeownership Report, if you truly want to learn how to engage with the Hispanic market and you want to do business with them. So this is one of the main reference guides to the Hispanic market. This report gets quoted by Bloomberg, by The Wall Street Journal, by all the media outlets out there.

The other one that’s important is the 2020 LDC U.S. Latino GDP Report. This is like the granddaddy of the one I just showed you. This one gets put out by the Latino Donor Collaborative. And what it is, it’s a study of the Latino market in comparison to a gross domestic product report.

Kristin Miller So, the US Hispanic population, and I know we talked about this a little bit before, but it passed 60 million in 2019, which is ridiculously up from 50 million in 2010, making the Hispanic community the nation’s second-fastest-growing racial and/or ethnic group behind Asian-Americans. Can you talk to us about the Hispanic market opportunity for mortgage lenders and how you think, maybe somebody that’s not currently focused or maybe quasi-focused on that, what are your thoughts there on targeting this very important demographic?

Frank Fuentes Sure, sure. And we touched on it earlier in some of the comments I made, but to reinforce it and to reiterate, one of the things to recognize is that Hispanics as a whole are the youngest of all demographics out there. The average age of those 60 million Hispanics is 29.5 years old. So it is a young generation overall, generally speaking, number one.

Number two, the Hispanic homeownership rate has been increasing for the last five years. So Hispanics are all about homeownership. And in some ethnicities, homeownership is not such a top priority like it is with Hispanics. And obviously, that’s a cultural thing. So that’s important to recognize. The other piece of it, and I’m going to take it from the Hispanic Homeownership Report is 66.8 percent of Hispanics are participating in the labor force. 66.8 percent. Almost 70 percent. That’s a lot. And that’s directly from the U.S. Bureau of Labor Statistics.

So I think those are some of the important highlights: that we’re a young generation, that we’re engaging highly in the labor force, and because of our cultural duality, we’re, generally speaking, more inclined to become homeowners than other ethnicities. So that’s important for all the real estate people here to be digesting and bringing in.

So I think those are some of the important highlights: that we’re a young generation, that we’re engaging highly in the labor force, and because of our cultural duality, we’re, generally speaking, more inclined to become homeowners than other ethnicities. So that’s important for all the real estate people here to be digesting and bringing in.

But again, we can look at all the data we want all day long, but it’s all about creating the strategy and putting it to work. But that strategy has to be culturally keen. That’s the key. That’s the secret sauce.

Kristin Miller I don’t think I ultimately was instilled in like “you need to own, or like, this is your goal, own a home by the time you’re 25.” And I do think within your cultural demographic that seems to be like the American dream. So being an outsider to this community, I would love to know why you think that is. And also I think it’s really important and maybe I wish my dad had said don’t – obviously he said work until you die, which I do today – but homeownership, and intangible things like that maybe weren’t so important.

Frank Fuentes Yeah, that’s just part of the culture. I mean, being a homeowner is just ingrained in our culture, and this goes back generations. And it’s really all about creating that patrimony, that house that is just ingrained in the majority of Hispanics and Latinos out there. And it’s very important when you’re engaging – again, I’m always going to keep going back to engagement and strategy – because that’s what it’s all about, how to do business, right? Because this is the topic of this conversation we’re having, is engaging with this community.

So it’s important to recognize that there is going to be – if you’re dealing with a millennial potential homebuyer and they happen to be Hispanic – know that there’s going to be that third party influence that’s going to be giving them that little nudge to buy that house, buy that condo, buy something now… from the aunt, from the uncle, from the godfather, there’s somebody going to be in that family when they’re doing that carne asada at home, that barbecue. And they’re going to be saying: “Hey, it’s time. You hear the rates are low, buy your house.” It’s common. It’s a common topic within most Hispanic households.

So there’s always going to be that individual there in the family who’s going to be pushing for homeownership because it’s just ingrained in our DNA.

Kristin Miller That’s so important on so many levels. So given the current climate with many Hispanics working in the front line positions and jobs and just how difficult that is. How have additional restrictions on lending impacted the Hispanic community?

Frank Fuentes So this whole COVID situation has definitely impacted Hispanics as a whole. Increased FICO requirements have been implemented. Additional reserve requirements have been implemented. Obviously, the verifications of employment for a lot of frontline workers, that’s an issue. Fortunately, at New American Funding, because we are minority-owned, we actually – believe it or not – reduced FICO score requirements when COVID hit.

Most lenders were increasing their FHA requirements from 620 to 660 or 680. We lowered them to 580. And that decision was made straight from the top from Patty Arvielo, who’s the president and co-founder of New American Funding. She goes, “I believe passionately in this demographic. I’m Latina. We’re going to continue following the FHA rule book and continue to do FHA loans down to a 580.”

We did not add any additional overlays to any of our loan programs except to a couple of downpayment assistance programs, which are third-party. But as far as FHA, VA, USDA, Fannie and Freddie, pretty much business as usual. And along those same lines, I also want to note that New American Funding delivers a lot, if not the most, manually underwritten loans to both agencies. And a lot of those loans are Latino loans, where we have the additional resources, we make the additional effort to look at conventional loans from a manual perspective, which is very rare in our industry. It happens more in FHA, but on the conventional side, it’s very rare for a lender to do manual underwriting on Fannie and Freddie. And we do.

Kristin Miller And you think that that manual review eliminates maybe some discrimination? And what are your thoughts on that, in terms of underwriting?

Frank Fuentes Absolutely, yeah. Because the only way you’re going to really understand a loan file is by manually underwriting. Especially with minorities, whether you’re Asian, African-American, Hispanic. There’s a lot of unique nuances within those demographics that it’s important for the underwriters to be keen on. Cash on hand, cash deposits, gift for down payments, lack of credit, thin credit, the use of non-occupying co-borrowers – very common. With Hispanic transactions, especially in high-cost areas like San Francisco, Los Angeles, Orange County where I’m in right now, your average entry-level home is $650,000, $700,000 – so you’re getting two, sometimes three families to qualify for one house, okay?

…the only way you’re going to really understand a loan file is by manually underwriting. Especially with minorities, whether you’re Asian, African-American, Hispanic. There’s a lot of unique nuances within those demographics that it’s important for the underwriters to be keen on. Cash on hand, cash deposits, gift for down payments, lack of credit, thin credit, the use of non-occupying co-borrowers – very common.

So underwriters and other companies or even at the big banks they’re thinking “Whoa, whoa, whoa. What’s going on here?” And unfortunately, in some cases, they’re very quick to either decline loan files like that or over-condition to the point where it’s pointless because they give you all these conditions that sometimes you can’t even satisfy. So that’s the automated underwriting fees. We have designated underwriters under our Latino Focus Committee that are specialized in underwriting Hispanic files.

Kristin Miller That’s so important because obviously and I wish we could get into this more, but people don’t fit into a box, right? And their employment and their jobs and their situation, do not fit into some type of checklist. But I do feel like, Frank, you and your team are addressing that and that is so important. This is such an important conversation, not only in general but honestly, it’s really timely. So, Frank, thank you so much for your time today, I so appreciate it. Your insights and experience and specific viewpoint are extremely valuable, and I really appreciate your time. So thank you so much.

Frank Fuentes You’re very welcome. I’m looking forward to part two!

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