Leonardo Simpser has blunt advice for homebuyers
considering a funny-money subprime loan requiring
no documentation: Don't! "If you can't afford to buy a
house," he says, "don't buy a house."
Simpser holds a key position in the American
mortgage market. He is managing director of the
Hispanic National Mortgage Association (HNMA), a
major new funding channel connecting Latinos and
other communities with Wall Street and the global
capital markets.
Hispanic first-time buyers not only constitute the
fastest-growing segment of the market, but they are
also among the most vulnerable to curveball pitches
from subprime mortgage lenders and brokers. Many
Latinos, especially recent immigrants, have low FICO
credit scores -- or no scores at all -- and appear to be
less creditworthy than they are in reality, Simpser
says.
Loan officers often don't look past the FICO score,
which is likely to be artificially depressed because of
the applicants' nontraditional credit histories. If they
want to buy a house, applicants are told, the only way
is to sign up for a subprime mortgage with high fees,
payment-shock rate resets and crushing prepayment
penalties.
San Diego-based HNMA, which has joint venture
funding relationships with Deutsche Bank and home
loan giant Wells Fargo Home Mortgage, exists
to "change this pattern and produce better products
and results" for Latinos and others who get raw deals
under the current system, Simpser says.
The company's research and development division,
for example, has created the first culturally sensitive
electronic application evaluation system -- the
Hispanic Automated Underwriting System, or HAUS.
The system enables private lenders to see through
nontraditional credit and income patterns quickly and
give appropriate weight to on-time payment
performances in rents, phone bills, utility accounts
and a variety of other credit indices.
HAUS eliminates the need for time-consuming
manual underwriting of nontraditional applicants and
allows lenders to underwrite borrowers with no Social
Security numbers and multiple income sources.
Virtually all of HNMA's customers traditionally would
have ended up in the subprime market, taking out
mortgages that now have delinquency rates of 14% or
higher. Yet with a year's worth of production, HNMA's
early delinquency rate "is zero," Simpser said, "and
foreclosures are zero."
KENNETH HARNEY, based in Washington, writes on
national housing issues. His e-mail address is
kenharney@earthlink.net.
