Mortgage Banking
August 1, 2002
Marketing Mortgages en Espanol:
Market Outlook
Statistical Data Included
By Andrea Lee Negroni and Lorna M. Neill
One in four residents speaks Spanish at
home in states such as Texas, New
Mexico and California. The 2000 Census
shows the U.S. Hispanic population
jumped 58 percent in the last decade.
There is huge business potential for
mortgage lenders who reach out to
Spanish-speaking borrowers.
U.S. population trends suggest mortgage
lenders who want to expand or even
maintain market share must reach out to
the foreign-born, the newly immigrated
and Americans of foreign heritage.
Research shows this is where a good deal
of the growth will come from in the
home buying markets in years ahead.
The growth that has occurred already in
these populations is impressive.
The U.S. Census Bureau's 2000 Current
Population Survey revealed a great
deal of information about the foreignborn population in the United States,
currently almost 25 million strong,
according to Immigrants in the United
States: A Snapshot of America's Foreign
Born Population, by Steven A.
Camarota, Center of Immigration
Studies, January 2001. More than a
quarter of these foreign-born immigrants
come from Mexico, according to the
Hispanic Literacy Task Force.
The Census also revealed a 58 percent
increase in the country's Hispanic
population in the past decade. That
population went from 22.4 million in
1990 to 35.3 million in 2002, according
to a May 8, 2002 article in USA Today,
"Spanish Enters Political Arsenal,"
accounting for 12 percent of the U.S.
population, according to the Census
Bureau.
The Hispanic population in the United
States is expected to increase to 63
million by the year 2030, and 88 million
by 2050, at which time one-quarter of
all Americans will be Hispanic,
according to the Hispanic Literacy Task
Force. Presently, one in 10 U.S.
residents speaks Spanish at home; this
number is closer to one in four in states
like Texas, New Mexico and California,
according to USA Today.
The largest groups of Spanish-speaking
residents come from Mexico, Cuba and
Puerto Rico. Of these groups, Cubans
have the highest home-ownership rate
(58 percent), the rate for Mexicans is 47
percent and for Puerto Ricans, 26
Page 2
percent. Overall, according to an April
24, 2002, Associated Press article by
Genaro C. Armas, "Hispanic
Homeownership Up," the
homeownership rate for Hispanics in the
U.S. increased from 42 percent in 1990 to
46 percent in 2000, which is 20
percent less than the 66 percent
homeownership rate for all Americans in
2000.
Some cities have had large populations of
Spanish speakers for many years,
including Los Angeles and Houston.
Studies indicate, however, that the
concentration of immigrants in these
areas is diminishing as new legal
immigrants settle elsewhere. A recent
report from the Center for Immigration
Studies, The New Ellis Islands, identified
counties where new immigrants account
for at least 50 percent of the existing
foreign-born population. The report
discovered 223 such counties, more than
half of which are located in the South
and a third in the Midwest.
These findings reflect "an important
social phenomenon, i.e., that
immigrants are spreading out into parts
of the country that have had little
immigration until now," according to an
October 2001 press release by the Center
for Immigration Studies. The 2000
Census shows more than 150
congressional districts have at least 10
percent Hispanic residents. For example,
40 percent of San Diego's registered
voters are Hispanic.
The numbers and population trends
speak for themselves, convincingly
demonstrating that financial products
can be effectively marketed to Spanishspeaking consumers. Reaching out to the
foreign-born, the newly immigrated and
non-English-speaking populations is
more easily said than done,
however.
Dealing with these populations can be a
challenge for mortgage lenders
because of cultural barriers, and to a
certain extent, because of a general
distrust of lenders. For example, a
January/February 2002 survey by Frank
Luntz and Jennifer Laszlo Mizrahi for
the National Community Reinvestment
Coalition found that 39 percent of
Hispanics surveyed said they believe that
banks deny loans to creditworthy
applicants because of their race, religion,
ethnicity or marital status.
In some cases, these negative perceptions
about lenders have been reinforced
by groups that report lending data.
Lender approval and denial rates for
minorities can be subject to many
variables that are not always fully
brought to light in study findings,
leaving mistaken perceptions about
lenders' treatment of minority
applicants.
An Association of Community
Organizations for Reform Now
(ACORN) study of Hispanics (referring
to ethnicity, however, not race;
Hispanics can be of any race) in Tucson,
Arizona, showed them to be nearly three
times more likely than whites to be
rejected for conventional loans. Factors
identified as accounting for the lower
approval rates include relatively lower
incomes, credit problems and spotty
employment histories, or employment
and credit that must be verified out of
the country, such as in Mexico.
©Reprinted with permission from Mortgage Banking Magazine, August, 2002. pp. 38-4. Published by the Mortgage Bankers
Association of America. All rights reserved.
Page 3
ACORN, a community activist
organization, charges that the mortgage
banking system does not adequately
serve low-income and minority
borrowers, pointing to a lack of
advertising in low-income areas.
However, in recent years many
mortgage lenders, such as Countrywide
Home Loans Inc., Calabasas, California,
and other industry players such as
Fannie Mae and Freddie Mac have
aggressively built up market outreach
programs targeting this very population.
Other advocates for Spanish-speaking
communities, including the National
Council of La Raza, believe that "the
primary barrier [to homeownership] is
not necessarily income and prices. The
primary barrier is a lack of
consumer-oriented help," according to an
April 24, 2002, Associated Press article
by Genaro C. Armas.
If advertising and consumer-oriented
help in Spanish-speaking areas have not
been sufficiently emphasized by the
mortgage industry, what can be done to
improve this market outreach? One
obvious solution is to reach borrowers
not only where they are, but in a
language they know.
Some lenders actively pursuing the
market
Some mortgage lenders are already doing
this. For example, Countrywide's Web
site has a "Comprador de casa por
primera vez" page
(http://firsttimebuyer.countrywide.com
/default.asp?langpref=spa), with other
helpful pages in Spanish, and a toll-free
number for Spanish-speaking callers.
Similarly, GreenPoint Mortgage, San
Rafael, California, has on its Web site
a personalized letter to Spanish-speaking
applicants, along with a phone number
and other helpful pages (including the
uniform residential loan application) in
Spanish
http://greenpoint.mortgagewebcenter.co
m/erhome/greenpointerhome.asp?
pid=26 and click on "Espanol" at
bottom of the page). Surprisingly,
Spanish translations on the mortgage
lender Web sites of Texas-based lenders
are rare. One notable exception is the
Spanish-language Web site of Houstonbased Allied Home Mortgage Capital
Corporation www.prestamopronto.net).
According to Ron Litt, executive vice
president at Allied, the Web site is part
of an overall strategy to reach the
Spanish-speaking community--"one of
the most under-served markets in the
mortgage industry," he says.
Along with a number of outreach and
loan assistance initiatives targeting
the Hispanic community, GMAC
Mortgage Corporation, Horsham,
Pennsylvania, has bilingual
representatives and offers point-of-sale
materials, customer satisfaction surveys,
correspondence, phone service and
seminars in Spanish. GMAC Senior Vice
President Arthur Fleming views these
efforts as Integral to GMAC's long-term
growth. "Obviously, statistics show that
the Hispanic community is the fastestgrowing market," he says. "And it's a
younger population, so we can develop
brand loyalties that will serve our
company over time."
Other types of specialized assistance are
also available. Stockbridge, Georgia--
©Reprinted with permission from Mortgage Banking Magazine, August, 2002. pp. 38-4. Published by the Mortgage Bankers
Association of America. All rights reserved.
Page 4
based Futures Home Assistance Program
(FHAP) (www.fhap.org/bindex.html)
recently created a Spanish department to
meet the linguistic and financial needs
of Hispanic communities throughout the
United States. The nonprofit FHAP
offers down-payment gift funds to assist
borrowers in buying homes. Borrowers
who qualify for Federal Housing
Administration (FHA) and conventional
loans can obtain up to 6 percent of their
loan amount in down-payment gift
funds.
As part of its outreach to Hispanics, the
FHAP has offices in San Juan,
Puerto Rico, and focuses its efforts on
Florida, Texas, California, Arizona and
Georgia--states with high growth rates in
their Hispanic communities. FHAP
offers a Spanish-language version of its
entire Web site (www.fhap.org/espanol)
and offers Spanish translations of all its
forms and brochures.
Even mortgage industry acquisitions are
being made with a view toward how
well the target company is positioned in
the Hispanic marketplace. The recent
announcement of the sale of Golden
State Bancorp Inc. San Francisco, to
Citigroup Inc., New York, was
accompanied by Citigroup President
Robert Willumstad's observation that
"by expanding our presence in
California, we are increasing our access
to the Hispanic community."
The decision to solicit and market
mortgage loans in Spanish or other
languages should not be made
impulsively or without consideration of
possible risks and problems, however. If
lenders initially reach out to Spanish-
speaking borrowers in Spanish, problems
may arise later if the remainder of the
transaction is conducted in English. To
avoid future claims of unfair or
deceptive practices, lenders must
determine whether the prospective
borrower actually understands the
proposed transaction, and prudent
lenders should take steps during the
transaction to ensure that the borrower
is fully aware of the nature and terms of
his or her obligations.
In addition, in a few cases, existing laws
and regulations require disclosures or
other communications in Spanish or a
foreign language. Forward-looking
lenders should consider these
requirements carefully when deciding
whether to offer mortgages and product
solicitations in Spanish. These laws are
reviewed below.
The issues raised in this article apply as
well to other foreign languages;
Spanish is used as an example because it
is the most widely spoken foreign
language in the United States, with more
people speaking Spanish than all other
foreign languages combined, according to
the Hispanic Literacy Task Force.
Statutes, rules, court decisions
California law currently requires real
estate loans, if negotiated in
Spanish, to include translations of
contract documents. This requirement
only applies to loans negotiated by
California licensed real estate brokers or
licensed finance lenders, but curiously,
not to lenders licensed by the
California Department of Corporations
under the Residential Mortgage Lending
Act.
©Reprinted with permission from Mortgage Banking Magazine, August, 2002. pp. 38-4. Published by the Mortgage Bankers
Association of America. All rights reserved.
Page 5
Arizona, another state with a high
proportion of Spanish speakers, has
several laws requiring Spanish
disclosures, but these laws are
inapplicable to mortgage lending. In that
state, only premium finance companies,
consumer loan lenders, and money
transmitters must provide disclosures or
notices in Spanish.
In Texas, a regulation applicable to
certain second-mortgage loans provides
that if all or most of the negotiations
between the lender and the borrower are
conducted in Spanish, the contract terms
must be disclosed in writing in Spanish
and English, with the following
statement written on the promissory
note: "Recibi la forma informe de
prestamo." (Translation: "I have received
the mortgage loan disclosure form.")
Oklahoma's Truth-in-Lending Act rules
(for contracts made under the Oklahoma
Consumer Credit Code) provide that:
"All disclosures... shall be made in the
English language, except in the
Commonwealth of Puerto Rico, where
creditors may, at their option, make
disclosures in the Spanish language. If
Spanish disclosures are made, English
disclosures shall be provided on the
consumer's request, either in substitution
for or in addition to the Spanish
disclosures."
The most recent state law on the subject
of Spanish-language translations of
loan documents was adopted in Illinois.
It requires certain disclosures for
non-English-language transactions
involving retail sales. If negotiations take
place in a language other than English,
the consumer must sign a statement
identifying the interpreter and affirming
his understanding of the transaction.
Alternatively, the retailer may provide
the translation and have the consumer
sign a statement that the contract was
explained in his or her native language.
While the specific laws and rules on
Spanish language translations of
mortgage loan transactions are few, some
state regulatory agencies are concerned
about the possibility of deception when
lenders negotiate a loan in one language
and document it in another. Most
"unfair and deceptive" trade practices
laws prohibit conduct that creates
confusion or misunderstanding; a
borrower who does not understand the
transaction documents is a prime
candidate for confusion or
misunderstanding.
According to a regulator at Maine's
Department of Consumer Credit
Regulation, the department once
required a lender to refund some of the
points charged on a subprime loan that
was solicited in Spanish. The loan
process was conducted in both Spanish
and English, and the lender
communicated with the borrower
through an English-speaking relative.
With these facts, the agency
concluded that the lender knew the
borrower did not speak English well
enough to conduct a loan transaction,
and thus the transaction was unfair.
On April 17, 2002, the Federal Trade
Commission (FTC) announced the
settlement of its first enforcement action
against a debt-collection company,
Houston-based United Recovery
Systems Inc. (URS), for violating the
rights of Spanish-speaking consumers. In
©Reprinted with permission from Mortgage Banking Magazine, August, 2002. pp. 38-4. Published by the Mortgage Bankers
Association of America. All rights reserved.
Page 6
addition to a $ 240,000 civil penalty,
URS is required to respond promptly to
consumer complaints. It must also
clearly and conspicuously disclose to
consumers their right to prevent contacts
about their debts and the fact they may
call a special toll-free telephone number
with any complaints. "Clear and
conspicuous" means that these
disclosures must be made in Spanish to
Spanish-speaking consumers.
In addition to the statutory law and the
efforts of regulatory agencies, courts and
judges have weighed in on the issue of
whether it is fair for a lender to enforce a
loan against a borrower who does not
understand the language of the
obligation. A New York court voided a
credit contract as unconscionable
where the lender used aggressive sales
tactics with the Spanish-speaking
borrower, but failed to provide loan
documents in Spanish or a Spanish
interpreter. The case was Brooklyn
Union Gas Co. v. Jimeniz (1975). More
recently, the United States District
Court for the Northern District of
Illinois cited the Brooklyn Union Gas
case with approval in Sitarz v. Drexel
Burnam Lambert Inc., et al. (1991).
For situations not involving loans or
mortgages, some states already have
laws requiring Spanish documents. These
include Connecticut's law requiring the
drawee of a dishonored check to
demand payment from the drawer in
both Spanish and English; the laws on
door-to-door solicitation sales (homesolicitation sales), requiring Spanish
language notice of cancellation rights in
Delaware, Kansas and Nebraska; the
New Mexico law requiring subdividers
of land to make disclosures in Spanish;
the New York law requiring licensed
check cashers to post fee schedules in
both English and Spanish, and more.
As the population of Spanish-speaking
borrowers increases, laws and
regulations will evolve to assist them in
understanding their debt obligations
in their native language. Ultimately,
more and more lawmakers will learn to
speak Spanish, to serve their constituents
and win re-election by an increasingly
Hispanic population. (The Republican
National Committee already announced
it will launch a Spanish-language
television show, and Spanish lessons
are given to members of Congress twice
weekly on Capitol Hill, reports USA
Today.)
What lenders need to do
With an increasingly diverse pool of
potential homeowners and growing
demands for more accessibility to credit
from minority and non-English-speaking
communities, lenders should consider
marketing their products and services in
Spanish and other foreign languages.
Translating marketing brochures is not
enough, however. Lenders that approach
prospective borrowers in foreign
languages should be prepared to assist
those customers throughout the loan
process to understand the nature and
terms of their obligations.
The laws and cases examined in this
article suggest that this assistance
appropriately might include making an
interpreter available and/or providing
translations of loan documents. Failure
to provide adequate language
accommodations in credit transactions
can lead to claims under unfair and
©Reprinted with permission from Mortgage Banking Magazine, August, 2002. pp. 38-4. Published by the Mortgage Bankers
Association of America. All rights reserved.
Page 7
deceptive trade practices laws. Lenders
not sensitive to the challenge of
foreign language product solicitation and
marketing may also unwittingly violate
emerging laws and rules specifically
requiring such assistance.
Lenders that focus on the growth
opportunities in the Spanish-speaking
segment of the mortgage market can
increase their market share and
profitability. If the National Council of
La Raza is right that "a lack of
consumer-oriented help" is the biggest
barrier to homeownership among
Hispanics, those lenders that overcome
this barrier are likely be the lenders of
choice for Hispanic homebuyers.
Andrea Lee Negroni is a partner and Lorna
M. Neill is an associate attorney
in the Financial Services Group of Goodwin
Procter LLP. Their practice focuses on
compliance of financial institutions with
federal and state laws, including those on
customer solicitation, loan origination and
loan product development, and
telemarketing. The authors may be reached
at (202) 974-1000 or via e-mail to
[email protected] and
[email protected].
©Reprinted with permission from Mortgage Banking Magazine, August, 2002. pp. 38-4. Published by the Mortgage Bankers
Association of America. All rights reserved.