REACHING THE IMMIGRANT MARKET: CREATING HOMEOWNERSHIP OPPORTUNITIES FOR NEW AMERICANS

1
REACHING THE IMMIGRANT MARKET CREATING
HOMEOWNERSHIP OPPORTUNITIES FOR NEW AMERICANS
Natasha Shulman
Institute for the Study of International
Migration Georgetown University
December 2003 Fresno, CA
2
Session Objectives

• In todays session we will discuss
• the growth of immigrant communities across the
  U.S.
• the barriers for new Americans working with
  financial institutions
• the growth of immigrant communities in Fresno
• the components of a bankwide strategy to serve
  customers in a language other than English

3
Who are the New Americans?
Major Barriers to Homeownership
Strategic Workbook
Next Steps
4
Americas Immigrants
There are 30 million immigrants in America
today, and each year about 1 million new
immigrants arrive.
Source Urban Institute
5
Americas Immigrants
Asian and Latin Americans Dominate Foreign-Born
26.5 Million Immigrants (March 1999 CPS)
Source Urban Institute
6
Americas Immigrants
Immigrants are Concentrated
Source Urban Institute
7
Americas Immigrants
New Immigration Growth Centers
8
Who are the New Americans?
Major Barriers to Homeownership
Strategic Workbook
Next Steps
9
Homeownership
Homeownership among immigrant households is
projected to grow dramatically in the 21st
century

• More than one-quarter of overall household growth
  (factor that accounts for most new residential
  construction).
• Immigrants are 3x as likely as all adults to rank
  buying a home as their number one priority.
• Why are immigrants now a largely untapped
  homebuying market?

10
Homeownership
But immigrants face major barriers to
homeownership

• Cultural assumptions/lack of familiarity with
  U.S. credit system
• Lack of credit history
• Conventional tools used by financial institutions
  to measure creditworthiness
• Language limitations
• Conventional mortgage products out of reach for
  low income
• Limited supply of affordable housing

11
Homeownership
Providing financial products and services to
immigrant communities hinges on three key factors

• Understanding immigrant markets
• Creating institutional capacity and partnerships
• Developing tools to reach the immigrant market

12
Who are the New Americans?
Major Barriers to Homeownership
Strategic Workbook
Next Steps
13

• EXERCISE 1
• EMERGING OPPORTUNITY EXERCISE

14
First National Bank and Trust Company of Rogers,
Arkansas (now Arvest Bank)

• The partnership
• A Lender-Employer Partnership
• Banking and immigrant home ownership education in
  the workplace
• Analysis of the problem
• Significant turnover rates in poultry processing
  industry - as high as 70 in early 1990s
• Incoming Hispanic immigrant population to provide
  stable workforce - now nearly 12 of Rogers
  population of 34,000
• Immigrants cultural and language diversity and
  unfamiliarity with U.S. financial system

15
First National Bank and Trust Company of Rogers,
Arkansas

• The solution
• Bank recognizes the potential of this emerging
  market and understands the needs of both the
  immigrants and the employer
• Financial seminar series Creating Hope in the
  Workplace
• Teaches basic banking skills and fundamentals of
  U.S. credit system
• Long term goal is home ownership
• Seminars offered by the Bank in the workplace
• Classroom space provided by employers
• Employer continues to pay workers when they
  attend seminar
• Taught by bi-lingual staff
• Bank committed to hiring bi-lingual staff and
  provided cultural training to personnel

16
First National Bank and Trust Company of Rogers,
Arkansas

• The results
• Sustainable home ownership
• no loans under Hispanic program have been in
  default
• over 500 immigrant families have purchased homes
  since 1994
• Stable Workforce
• The Bank captured a new market
• 52 of immigrants in Rogers are Bank customers
  totaling 26.5M in business (as of 4/30/99)
• 5M in deposit accounts
• 1.2M in consumer loans
• 20M in mortgage loans
• 340,000 in commercial loan

17
First National Bank and Trust Company of Rogers,
Arkansas

• Keys component of success
• Having a champion inside the financial
  institution
• Commitment of banks senior management team
• Preparation of the banks staff
• Developing alternative underwriting guidelines
• Commitment of communitys leadership
• Employer subsidies for conducting classes in
  workplace
• Seminars that cover financial basic in simple
  terms with culturally-informed, bilingual
  instructors
• Supply of well-paying entry level jobs and
  affordable housing

18
Strategic Workbook
Strategic workbook outlines a seven step process
for working with immigrant communities

• Understanding the immigrants
• Building institutional support
• Establishing institutional capacity
• Reaching new Americans
• Determining creditworthiness
• Developing effective loan products
• Developing goals, action plan and evaluation
  tools

19

• Step One Understanding the Immigrants

20
Strategic Workbook Understanding the Immigrants
How immigrants come to the U.S.

• Most admitted with green cardsLawful Permanent
  Residents on citizenship track
• Refugeesalso expected to make permanent home
  (can apply for green card a year after their
  arrival)
• Temporary immigrants with visa to study or work
  on a time-limited basis
• Unauthorizedenter without permission or stay
  beyond lawful temporary period. Many join family
  with legal status.

21
Legal Status of Immigrants
Legal Aliens (LPR) (9.3 million) 30
Undocumented Aliens (8.5 million) 28
Legal Nonimmigrants (1.3 million) 4
Naturalized Citizens (9.2 million) 30
Refugee Arrivals (2.3 million) 8
30.5 Million Foreign-Born (Based on March 2000
CPS Census 2000)
(Preliminary) Entered 1980 or later
22
Strategic Workbook Understanding the Immigrants
Understand immigrant values orientation

• Explore community versus individual
  orientation
• Appreciate the importance of relationships
• Takes time
• Customers will follow trusted banker
• Acknowledge the significance of in-language
  materials
• Comprehension
• Respect

23
Strategic Workbook Understanding the Immigrants
Learn about immigrant communities in your area

• Research potential immigrant homeowners
• Network to build a bridge to those markets
• Identify outstanding market opportunity
• Summarize findings

24
Strategic Workbook Immigration Trends into
Fresno, CA MSA

• Within recent years, the top countries from
  which immigrants originate from and settle in the
  Fresno MSA are Mexico, Laos, India, the
  Philippines.

Source INS
25
Strategic Workbook Geography of Hispanics,
Fresno, CA MSA
Source 2002 Claritas, Inc. projections
26
Strategic Workbook Hispanics by Household Income
Fresno, CA MSA
Hisp. Median HH Income 28,079

• 22 of Hispanic households earn more than
  50,000 annually.
• Fresno, CA MSA ranks average among other MSAs in
  terms of Hispanic median household income.

Source 2000 Census
27
Strategic Workbook Hispanic Population Growth
Fresno, CA MSA
Projected data suggests that the Hispanic
population growth within Fresno, CA MSA will
continue to be even stronger over the coming
years.
Source US Census Claritas, Inc.
28

• Step Two Building Institutional Support

29
Strategic Workbook Building Institutional Support
Develop management support

• Present market opportunity
• Ensure senior management support
• Create senior level accountability
• Identify department leads
• Commit to regular reporting and follow-up

30

• Step Three Establishing Institutional Capacity

31
Strategic Workbook Establishing Institutional
Capacity
Understand the customer experience

• Learn about customer experience
• Gather feedback from every customer contact point
• Identify the ideal customer experience
• Analyze data
• Identify gaps
• Determine costs to fill gaps
• Prioritize actions based on importance and cost
• Develop action plan
• Track and report progress

32

• EXERCISE 2
• STAFFING EXERCISE

33
Norwest Mortgage/ Wells FargoSeattle, WA

• Analysis of the problem
• Lack of trained multilingual talent to serve
  Asian immigrant communities

34
Norwest Mortgage/ Wells FargoSeattle, WA

• The solution
• Created a training program to develop bilingual
  staff
• Three months, two hours/ day
• Mortgage 101
• Repetitive lessons
• Incorporated ESL
• Ongoing cross training
• Three year program

35
Norwest Mortgage/ Wells FargoSeattle, WA

• The results
• 1999, the 19 member team served immigrants from
  China, El Salvador, Hong Kong, Korea, Laos,
  Mexico, the Philippines, Russia, Taiwan, the
  Ukraine, and Vietnam.
• More than seventeen languages and dialects spoken

36
Norwest Mortgage/ Wells FargoSeattle, WA

• Key components of success
• Investment of time
• Understand industry language
• Understand mortgage process
• Self-support system
• Mentors
• Low turnover

37
Strategic Workbook Establishing Institutional
Capacity
Create a multilingual staffing plan

• Everyone involved in the hiring process needs to
• Recognize the importance of multilingual
  employees
• Acknowledge that candidates may need training
• Learn the personal characteristics valued by
  identified culture
• Know the employee characteristics valued by the
  organization

38
Strategic Workbook Establishing Institutional
Capacity
Develop a multilingual staffing plan

• Identify needed customer contact positions
• Identify current employees language skills
• Match current employees with needed positions
• Identify additional staffing needs
• Develop a recruiting strategy
• Retain and develop strong employees
• Track and report progress

39
Strategic Workbook Establishing Institutional
Capacity
Build cross-cultural relationships

• Work with people in ways that they feel respected
• Understand norms and values of other cultures
• Treat people with patience, sincerity and respect

40

• Step Four Reaching New Americans

41
Strategic Workbook Reaching New Americans
Develop an outreach strategy

• Establish a presence in the community
• Use multi-tiered approach which includes
• Partnerships
• Education
• Advertising
• Sponsorships
• Volunteer activities
• Develop a strategy that is creative and attentive
  to community needs

42
Strategic Workbook Reaching New Americans
Build effective partnerships

• Partnerships between CBOs and Financial
  Institutions (Education, Counseling Affordable
  Loans)
• Partnerships between Employers and Financial
  Institutions (Financial Literacy)
• Public-Private Partnerships (Education,
  Counseling Development of Affordable Housing)

CBOs
Immigrants
FinancialInstitutions
Employers
43
The Home Ownership CenterMinneapolis-St.Paul,
Minnesota

• The partnership
• A Public-Private Partnership
• Home ownership education, counseling and access
  to credit
• Analysis of the problem
• No consistency in home ownership outreach and
  education
• Fledgling home ownership counseling organizations
• Gaps in existing homebuyer support system
• Growing desire community-wide to expand
  homeownership opportunities for low-to-moderate
  income families

44
The Home Ownership CenterMinneapolis-St.Paul,
Minnesota

• The solution
• Creation of The Home Ownership Center
• Includes all stakeholders
• Public - Cities of Minneapolis and St. Paul,
  State of Minnesota Housing Finance Agency, State
  Dept. of Commerce
• Private - Lenders, Realtors, mortgage insurance
  companies
• Non-profit home ownership education and
  counseling groups
• Offers centralized support (including funding)
  and coordination of capable and credible
  non-profit groups that provide home ownership
  counseling and support services to underserved
  communities

45
The Home Ownership CenterMinneapolis-St.Paul,
Minnesota

• The results
• 11,250 households completed workshop series
• 4,800 households received mortgage counseling
• 4,000 homes purchased by participants
• (above from 1/1994-12/2000)
• In 2000, first-time homebuyers comprised 93 of
  all households served 33 were first generation
  homebuyers

46
The Home Ownership CenterMinneapolis-St.Paul,
Minnesota

• Key components of success
• Public entities are true partners offering
  financing mechanisms and funding
• Strong commitment of all stakeholders
• Center serves as an intermediary - not a direct
  provider
• Center is a funding intermediary between the
  public and private institutional partners and
  non-profit service providers
• Standard comprehensive home ownership education
  curriculum and counseling including outreach,
  pre-purchase counseling, financing, post-purchase
  counseling and foreclosure prevention

47
Develop knowledgeable consumers
Strategic Workbook Reaching New Americans

• Provide education that is linguistically and
  culturally appropriate
• Offer personal financial skills education
• Budgeting, checking/savings
• Offer U.S. credit system education
• Establishing a credit history
• Credit
• Offer homeownership classes and counseling
• Budgeting through financing a home
• Ongoing counseling

48
Develop culturally relevant advertising
Strategic Workbook Reaching New Americans

• Transliterate materials to ensure linguistic
  accuracy and cultural relevance
• Research formats and delivery channels
• Community message
• Educational message
• Radio, print, videos
• Establish a continual presence
• Ensure that staff are aware of efforts

49
Encourage volunteer activities
Strategic Workbook Reaching New Americans

• Community involvement is critical to developing
  relationships
• Ensure that volunteers are aware of targeted
  efforts
• Acknowledge volunteer efforts

50

• Step Five Determining Creditworthiness

51
Evaluate and modify underwriting guidelines
Strategic Workbook Determining Creditworthiness

• Standardized screening miss immigrant financial
  portrait
• Undocumented income
• Pooled household income
• Supplemental income
• Employment history
• Credit history
• Verifying assets
• Assess whether credit guidelines meet the needs
  of immigrant communities
• Modify guidelines
• Protect safety and soundness while reflecting
  immigrant life experience

52

• Step Six Developing Effective Loan Products

53
Evaluate and modify loan products and services
Strategic Workbook Developing Effective Loan
Products

• Conduct internal and external research
• Evaluate current loan products
• Evaluate competitors loan products
• Develop criteria that serve immigrant markets
• Lower down payments
• Higher qualifying ratios
• Latitude regarding immigrant status

54
Self-Help EnterprisesSan Joaquin Valley,
California

• The partnership
• Mutual Self-Help - Sweat Equity
• Families, Technical Assistance Providers (CBOs),
  and Lenders (USDA subsidized loan programs)
• Analysis of the problem
• San Joaquin Valley ranks 10th from the bottom in
  per capita household income between SC and AL
• San Joaquin Valley ranks 4th in number of persons
  involved in farming, forestry and fishing
• New Americans lack the resources for downpayment
  and other costs
• Homeownership out of reach for areas low-income
  families but housing desperately needed
• ( 1996 CA Research Bureau report comparing San
  Joaquin Valley to other states reflecting 1990
  Census data)

55
Self-Help EnterprisesSan Joaquin Valley,
California

• The solution
• Mutual self-help housing
• Program participants under 80 of area median
  income - incomes ranging from 14,000 - 25,000
• Groups of 10-12 families work on their homes
  together in a building group
• All participants must work on project 40 hours a
  week
• Sweat equity participants build 70 of the homes
  (plumbing, drywall, insulation, stucco and
  roofing usually contracted out)
• 8-10 month construction period
• Non-Profit CBO provides technical assistance -
  developer, construction supervisor, loan
  facilitator, participant screener and
  homeownership educator
• USDA 502 direct loan program provides subsidized
  mortgages to homebuyers and USDA 523 program
  provides support to technical assistance providers

56
Self-Help EnterprisesSan Joaquin Valley,
California

• The results
• Sustainable Homeownership
• over 5,000 families own 3-4 bedroom homes
• 85 have lived in their homes more than 7 years
• 79 have lived in their homes more than 10 years
• 68 have lived in their homes more than 20 years
• Since 1976, only 3 of Self-Help families have
  suffered foreclosure
• Community Building
• Homebuilders have invested sweat in their
  neighbors homes
• Valued closeness felt with neighbors as principal
  reason for neighborhood stability

57
Self-Help EnterprisesSan Joaquin Valley,
California

• Key components of success
• Available building sites
• Access to affordable construction and mortgage
  financing
• Identification and counseling of qualified
  participants
• Mutual self-help philosophy
• all homes built by all participants at the same
  time
• each home progresses at the same pace - maintains
  the collective commitment of the group
• Skilled on-site construction supervision
• Technical and organizational capacity to
  coordinate the effort

58

• Step Seven Developing an Action Plan

59
Develop goals, an action plan and evaluation tools
Strategic Workbook Developing an Action Plan

• Establish organizational goals
• Develop an action plan
• Develop an evaluation tool

60

• Summary

61
Ten essential strategies for targeting the
immigrant market
Strategic Workbook Summary

• Learn about immigrants through a variety of tools
• Analyze how new Americans experience the mortgage
  process
• Create processes for staff to provide effective
  financial services to immigrants
• Develop and maintain multilingual staff
  capabilities
• Communicate well across cultures
• Establish successful outreach strategies to
  market to new Americans

62
Ten essential strategies for targeting the
immigrant market
Strategic Workbook Developing an Action Plan

• Build effective partnerships with community-based
  organizations, employers, and public entities
  that will help your institution reach immigrants
• Create educational programs that connect your
  institution with immigrant and teach needed
  skills and information
• Establish underwriting guidelines that enable
  your institution to properly assess immigrant
  creditworthiness
• Develop effective loan products that will attract
  new American to home buying

63
Who are the New Americans?
Major Barriers to Homeownership
Strategic Workbook
Next Steps
64
Next Steps

• Self guided process
• Identify market opportunity
• Gain senior management support
• Identify organizational champion and warrior
  to lead the process
• Work with Development Training Institute
• Jeff Nugent
• 410.338.2512 x218
• Work with Fannie Mae Partnership office
• Jim Price
• 916.341.1240 / James_price_at_fanniemae.com
• Work with the American Bankers Association
• James Ballentine
• 202.663.5359 / jballent_at_aba.com
• Work with Federal Reserve Bank of San Francisco
• John Olson
• 415.974.2989 / john.olson_at_sf.frb.org