The 2012 NAHREP president speaks openly about how Hispanic homeownership is still suffering because of unfair conditions in the bidding process against cash investors and the flaws in Fannie and Freddie handling of REO inventories.
El sueño de la casa propia is not only an American dream. Nothing is more important for a Hispanic family than owning their own home and settling in a place where their children and grandchildren will grow roots while they grow old. It is a way to “belong.”
But despite the misleading headlines about the U.S. household wealth recovery, Hispanic homeowners and homeowners-to-be are still at the bottom of the pit.
The real estate crisis left many in disarray, facing foreclosure proceedings of the family home they worked so hard to acquire. Others “under the water” lost their only asset and the equity in their homes, a value that perhaps took years and multiple mortgage payments to build.
Yet, in the middle of the soft but increasing real estate industry recovery, Hispanics are progressively becoming the fastest growing group of first-time home buyers. About 11 percent of Latinos are looking for a new home, which constitutes a 38 percent increase in Latino potential first-time buyers since 2010, according to the National Association of Hispanic Real Estate Professionals (NAHREP) 2011 report.
These enthusiastic hunters of well-priced real estate properties are facing new challenges and it is neither lack of access to mortgage loans or financial institutions nor lack of knowledge of the real estate process, not even language barriers, obstacles known to be part of the Hispanic homeownership gap. These are young, second or third generation well-qualified individuals and couples looking to realize their dream.
Hispanic homeownership threatened by bias bidding process
What is preventing Hispanics from becoming the new generation of first-time buyers then?
“It is not the credit crunch or the lack of financing, a general idea about the Latino potential homeowner but the obstacle is really the lack of inventory and the unfair conditions Hispanics are facing in the bidding process against large cash investors,” Gerardo Ascencio, 2012 NAHREP president, told VOXXI in an exclusive interview.
A 22-year veteran of the real estate industry, owner of a 50-agent operation based in the San Fernando Valley and well-known advocate of the Hispanic community, Ascencio believes Latinos represent a strong demand of good housing opportunities but are being worn out by the multiple offers they need to make in order to compete with REO disposition program pool sales.
“We see 20, 30 or 40 offers per listing and potential homeowners making multiple offers to several properties but after three to four months, they get discouraged and worn out. They get beat up by cash buyers and pool investors who offer a fast closing even at lower prices while Latino homeowners, many of who hold FHA or VA backed mortgages, need to wait as long as 60 days for their contracts to close,” Ascencio explains.
Banks growing inventory works against Hispanic homeownership
Despite Fannie Mae and Freddie Mac insistence in wanting “to keep people in their homes whenever possible,” the system flaws are blatant. The REO pipeline is not moving fast enough. The number of foreclosures grew exponentially peaking in May 2010 until it started decreasing after the lender’s robo-signing and forgery was exposed in the fall of the same year, which slowed down the foreclosure procedures.
Banks have been reluctant to negotiate loan modifications because of market vulnerability, high unemployment rates and lack of trust in the ability of homeowners to repay their already troubled or “under the water” properties. On the other hand, keeping an inventory of empty houses depresses neighborhoods and presents an occasion for vandalism and property decay.
“The best way to heal the real estate market organically is to sell vacant properties to potential homeowners for top dollars,” Ascencio said. “Homeowners are vested in their communities, their barrios, they participate in school PTAs, they contribute to their neighborhood cleanup and safety, they vote.”
But financial institutions, banks and agencies are taking the easy way out with their REO inventories, according to NAHREP president. “They do not want to deal with individual homeowners, pay real estate agents’ commissions and keep maintaining vacant properties including taxes payments, repairs and expenses,” he added. “They prefer to sell at a lower price in 20 days rather than wait 45 to 60 days.”