Scotsman Guide - October 2009 Residential Edition

CHAIRMAN AND PRESIDENT National Association of Hispanic Real Estate Professionals Tino Diaz

as seen elsewhere, federal housing administration (fha) loans are gain- ing popularity in brooklyn, with purchase volume doubling between June 2008

and this past June, according to a MortgageDataWeb.com survey of select lenders.

But their usefulness is a bit different in New York’s most-populous borough, where even

a 16-percent home-price drop between the second quarters of 2008 and 2009 leaves

the median home price 2.5-times greater than the national average.

One factor is the housing mix: According to a market summary by Prudential Douglas

Elliman and Miller Samuel Inc., co-ops — currently ineligible for FHA financing — and

condos comprised 49.9 percent of Brooklyn sales in the second quarter; condos alone

were 26 percent of overall sales. The FHA requires at least half of a condo develop-

ment’s units to be sold before it will offer financing. Comparatively, Fannie Mae won’t

lend on new or converted condos unless at least 70 percent of the development’s units

are presold or under contract — up from 51 percent previously.

FHA’s potential 3.5-percent downpayment also is attractive to first-time buyers in Brook-

lyn, where incomes still are below the U.S. average.

With FHA gaining ground, sales of all property types increased 20. 4 percent from this past

first quarter to second quarter, dwarfing the average winter-to-spring gain of 1.7 percent

since 2003.

What the Locals Say

“You have the lower-end market — $800,000 and less — that is still moving. Then you have the high-end market, which is only selling to people who are well-qualified. The market has pushed out people who want to buy a $2 million house with [only] 20 percent down.”

—;MARK;MAIMON,;DIRECTOR;OF;SALES,;UNIVERSAL;MORTGAGE;INC.

Vitals

▲ Borough/Kings County population: 2.56 million

• Population in 2000: 2.47 million

• Rank among counties (U.S.): 7th-largest

• City population: 8. 36 million

• City rank (U.S.): 1st

• Metropolitan-area population: 19 million

• Metropolitan-area rank: 1st

▲ Average commute: 44.2 minutes

• Average commute in 2000: 43.2 minutes

• U.S: 25. 3 minutes

▲ Median household income: $41,406

• Median household income in 2000: $32,135

• U.S.: $50,740

▲ Median age: 35.1 years

• Median age in 2000: 33.1 years

• U.S.: 36. 7 years

▼ Inflation (Consumer Price Index, MSA, July): -1.1 percent

• Inflation in July 2008: 5.1 percent

• U.S. (July): -1.9 percent

▲ Unemployment (June): 9. 9 percent

• Unemployment in June 2008: 5. 5 percent

• U.S. (June): 9. 5 percent

Industry

• Licensing: Individuals and companies applying to own and operate broker operations must submit materials through the Nationwide Mortgage Licensing System’s online application process and pay required fees. Applicants must submit a personal credit report; surety bond or deposit agreement; personal financial statements; a business plan; and a fair-lending-compliance plan.

• Number of broker companies:

• Borough: 140

• State: 1,481

• State association: New York Association of Mortgage Brokers, nyamb.org

Market

▼ Median home price (condos, co-ops & one- to three-family properties): $441,090

• Median price in second quarter 2008: $525,000

• U.S. (single-family): $174,100

▼ Total home sales: 1,428

• Total home sales in second quarter 2008: 2,031

▲ Average days on market: 146

• Days on market in second quarter 2008: 136

▲ Inventory: 6,330 properties

• Inventory in second quarter 2008: 6,037 properties

▲ Median monthly housing costs: $2,365

• Median monthly housing costs in 2000: $1,605

• U.S.: $1,464

▲ Housing units: 959,465

• Housing units in 2000: 930,866

▲ Foreclosure volume (Brooklyn/Kings County, July): 716

• Volume in July 2008: 622

• County rank in state by foreclosure percentage: 12th (out of 62)

▼ FHA average purchase-loan size (June): $470,400*

• Average in June 2008: $505,400

▲ FHA average refinance loan size (June): $434,164*

• Average in June 2008: $432,268

▼ Conforming-loan limit (one-unit): $625,500 • Limit in 2008: $729,750

• U.S.: $417,000

Résumé

• Demographics: 43 percent white, 35 percent black, 9 percent Asian, 13 percent other; 20 percent identify as Hispanic or Latino

• Top private employers: Rainbow USA Inc., National Grid, New York Health Care Inc., MJG Nursing Home Co. Inc.

*MortgageDataWeb.com

Having recently celebrated its 10th anniversary, the 15,000-member National Association of Hispanic Real Estate Professionals (NAHREP) holds its annual marketing conference for all types of real estate pros this month in Las Vegas. NAHREP Chairman and President Tino Diaz discusses the Hispanic community and its importance to mortgage brokers and the country’s financial future.

How has NAHREP reacted to the downturn of the past two years? Our mission remains ever the same and just as necessary. The need to make sure that we sustainably increase the rate of Hispanic homeownership is critical not just to Hispanics but also to all Americans. Many long-time participants in the mortgage business took for granted that housing people meant housing them sustainably. Greed gave way to practices that were transaction-based as opposed to based on building a community.

According to the Pew Hispanic Center, Hispanics will account for most of the U.S. population growth between now and 2050, when they will comprise 29 percent of the populace. What does this mean for the mortgage industry? Today’s Hispanic population is exactly the same kind of population we had right after World War II — a young population. The baby boomers are the ones who created U.S. expansion and growth in wealth. This is their replacement. It makes good business sense to help Hispanics and other minority groups make their homes safely and successfully. Wealth creation happens through homeownership.

According to some surveys, minority borrowers, including Hispanics, were targeted for subprime lending. What’s NAHREP’s take on this? Is there targeting? Yes. But I’ll tell you, there are factors in there, such as Hispanic borrowers not fitting the U.S. home-lending tradition. For example, many Hispanics don’t establish credit because they believe in buying things with cash.

How can the lending industry adjust to that? Alternative credit scores are absolutely critical. We have eliminated the traditional underwriter’s authority to make lending decisions based on character with this thing called the credit score. Some of the alternative credit scores being developed use excellent approaches. Assessing borrowers accurately is not an easy problem, but it’s one that can be solved with different and better tools. So we are very much behind alternative credit scores being brought into the system.

What challenges face the introduction of new lending tools and methods? A delicate balance needs to be struck. We want to protect consumers at the same time we make sure there’s a healthy amount of free-market capitalist creativity going on. Now is a time when we need experimentation — safe experimentation — to help people get into homes sustainably.

How can brokers balance initiatives to increase Hispanic homeownership sustainably with increased scrutiny on borrower qualifications? It’s about implementing a systematic and conscientious effort to educate borrowers; painting a clear picture of how homeownership is within their grasp; educating them on their options; and helping them build a creditworthy profile and a budget that incorporates all the aspects of homeownership in their lifestyle.