Housing continues to outperform the rest of the economy, but the lending industry shouldn’t be content with the status quo.

At least that’s the opinion of Freddie Mac vice president of community development lending Craig S. Nickerson, who has outlined a series of initiatives Freddie is introducing in single-family lending that target minority and immigrant borrowers.

The initiatives include new products, outreach and technology.

Why? Minorities – African-Americans, Latinos and other minority groups, including Asians, will account for much of the growth in under-age 55 households during this decade. Whites will still dominate the over 55 segment, but even there minorities will be well represented, Freddie Mac statistics show.

In fact, Nickerson said minorities will account for 65 percent of net household growth during this decade. Hispanic and Asian household growth will account for the largest share of that increase, and because they are younger, minorities will constitute a large part of first-time homeownership demand.

Minorities will become the majority of new homeowners – almost 60 percent of new buyers.

Between 1991 and 2000, an estimated nine million people from other countries legally immigrated to the United States, according to the Immigration and Naturalization Service.

Immigration continues to increase, even after the uncertainties created by the terrorist attacks on Sept. 11, with nearly 10 million expected arrivals during this decade. This will account for 27 percent of total household growth between now and 2010.

Hispanic household growth will be the largest contributor to this increase, with Mexicans leading the way.

In general, this group represents less wealth than the traditional homebuying market and their families are much larger. In the case of people from Mexico, while the homeownership rate in their native country is 80 percent, only 10 percent of all homes are financed.

In response to the opportunities offered by this market, Freddie has come with three new products – Mortgage Solutions for Immigrant Families, Lease Purchase Plus, which Nickerson calls a “21st century solution to credit and cash challenges, and Building Downpayment Grants, which is designed to improve marketability.

What Freddie Mac’s Mortgage Solutions product has done is to eliminate special requirements for lending to permanent and nonpermanent resident aliens, Nickerson said. Borrowers can be non-United States citizens who are lawful residents. There are no geographic limits on property, which are owner-occupied and one to two units. There is also a TLTV of 105 percent for purchase and refinance.

Income from boarders can account for up to 30 percent of a qualifying monthly payment. Throughout U.S. history, new arrivals have rented rooms from more established fellow countrymen as a way of becoming acclimated to their new home and to save money to bring relatives to the United States or send it as support for families back home.

The program allows cash on hand to be considered a source of funds and credit can be a 12-month history of non-traditional credit, Nickerson said.

Nickerson calls the 21st Century Lease-Purchase program both a credit solution and a down payment solution. Under the program, which is designed to help “no credit” and credit-impaired borrowers, no down payment is ever required.

Instead, a three-year lease period is used to demonstrate financial responsibility. It allows a family to convert to ownership through the assumption of a mortgage from a non-profit authority.

The Building Downpayment component is designed to improve the marketability of new construction, Nickerson said. In this program, home builders can contribute to the down payment on behalf of the buyer that is up to 3 percent of the home price.

Select lenders are being provided with this authority. Wells Fargo Home Mortgage is participating in this program, Nickerson said.

As far as education and outreach is concerned, Nickerson said that the best way to reach the new buyer is by thinking out of the box.

One way to increase buyers is by trying to help people avoid credit problems early in life so the problems won’t come back to haunt them when they go to by houses. While it is not impossible for those with a history of late or missed payments to buy a house, the credit-repair programs offered by counseling services can delay home purchases by several months to several years.

So Freddie Mac’s Credit Smart program is designed to help people learn how to handle credit from the start.

Freddie Mac is trying to use non-traditional methods of reaching the minority buyer, for example, through McDonald’s, and through consumer-oriented Web content. Nickerson said Freddie also is acting to fight predatory lending as a way to preserve homeownership.

New technology solutions introduced by Freddie Mac include enhancement of Loan Prospector, which have increased borrower acceptance, and CounselorMax, a new counseling management tool, Nickerson said.

Published: February 28, 2002

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Al Heavens writes about real estate and home repair and improvement. He is the author of What No One Ever Tells You About Renovating Your Home: Real-Life Advice For Hassle-free, Cost-Effective Remodeling.