With more more Americans losing their jobs or filing for unemployment benefits by the day due to the COVID-19 pandemic, the numbers of homeowners forced to reexamine their mortgage payment options continues to rise.
An Urban Institute survey last month found that job and income losses, although widespread across all demographics, have been more common in Hispanic households. The same survey found that Hispanic and African American adults were most likely to report that their families reduced spending on food, tapped into savings or increased their credit-card debt.
To get a sense of whether minority homeowners and borrowers have been similarly strained when it comes to their housing costs, Scotsman Guide spoke with Rick and Patty Arvielo, co-founders of New American Funding. The Orange County, California-based direct mortgage lender has one of the largest minority customer bases in the country.
Both Rick and Patty — the company’s CEO and president, respectively — are advocates with the National Association of Hispanic Real Estate Professionals (NAHREP). The pair discussed the challenges dealt to their diverse clientele by the ongoing outbreak, as well as how lenders can be proactive supporters of their minority customer base during this difficult time.
Scotsman Guide: New American Funding does a lot of work with Hispanic and African American borrowers as a share of its loan volume. There hasn’t been much large-scale data yet about the impact COVID-19 has had on minority homeowners and borrowers. Have you observed any major trends one way or the other in regard to your own portfolio?
Rick Arvielo: You know, when the forbearance requests started coming in, we asked the question: Is there a disproportionately larger share of consumers coming out of these ethnic groups asking for the forbearance? We were very pleased to see that the answer is no.
It’s relevant by FICO band, meaning at [a FICO score of] 685, a borrower is going to ask for forbearance less than a 660 borrower, and a 660 borrower is going to ask less than a 640 borrower. There’s a distinct rise in forbearance requests as you move down the FICO bands. But when you break those bands up by ethnicity, there’s absolutely no difference. A white 660 borrower is going to act and react the same way as a Latino 660 borrower and an African American 660 borrower — at least in our book.
Patty Arvielo: That’s not to say that there isn’t an impact to minority communities. There’s a language barrier. There’s a stigma. There’s a lot of fear. There are cultural differences. And if you have a large number of borrowers in minority groups like we do, I think that it’s important to be ahead of the game.
SG: What kinds of impacts are we talking about, and how does a lender stay ahead of the curve in serving their minority borrowers during a calamity like this?
PA: You have to understand, a lot of these Hispanic borrowers have this fear of not understanding completely a new term to them, especially when there’s so much else going on. They don’t have this word “forbearance” in El Salvador or Mexico, so it’s very important to have a simple, understanding, warm kind of place that they can go and feel very comfortable asking questions.
When I started to see the impact to the marginalized communities, we got together with NAHREP and we launched a website, No Pierdas Tu Casa. That’s “don’t lose your home” in Spanish. It’s directed toward education — educating the borrower on the steps of forbearance, on the steps of loan modification if needed, and really to take away the stigma and the fear of calling your servicer.
RA: We do what we can to educate our book. When it comes to these people that are calling in, we spend the time to talk to them about everything that’s going on and what it’s going to mean to them on the other side of this, at least the way the rules are written now. And if something changes, we’ll be sure to clue them in on that as well.
I think that they appreciate it. And a lot of people that call in for forbearance choose not to get a forbearance. They might not need it or maybe there’s a better [loan modification] option. And even the ones that ask for forbearance are still making their payments. So, those conversations are bearing fruit because now that they’re making payments, they don’t have to worry about what’s going to happen to them on the other side.
SG: What do you see as the biggest challenge that minority homebuyers and homeowners are facing as the coronavirus crisis goes on?
PA: I don’t know if it’s the biggest challenge, but one challenge that we are seeing is that a lot of Latino homeowners are calling their broker or another lender and being told that they’re not [offering refinance loans] below 680 FICO on FHA, for example. Well, we are. Some other [independent mortgage banks] are. It’s that same thing of, “Don’t take no as the final answer.” Shop your mortgage.
Because if you deny that opportunity, you’re taking their access to the only savings they have, which is their home. They’re not able to access the equity in their homes right now when they need it the most. It’s a problem. We’re taking those calls as a company, partially to address the issues that are going on in a very special market.