Hispanic Resource Center

News Updates...

(updated December 11, 2007)

Most lenders doing marginal job serving Hispanics

Most financial service providers do only a marginal job of meeting the needs of Latinos, says a new report from the Filene Research Institute.

In “Financial Services and Product Usage by Latinos in the United States,” Barbara J. Robles, Arizona State University, suggests the Hispanic market wants to know more about financial products and services, though many seem out of reach or unaffordable.

Education is the key to improving the U.S. Latinos’ social and economic status. While not well versed about consumer finance issues, Hispanics are interested in learning, Robles suggest. Hispanics tend to be financially underserved; growing in wealth and income; saddled with high-cost installment debt; and not taking advantage of savings and wealth-building opportunities.

Robles examined data from nearly 15,000 survey observations over a three year period. The report encourages credit unions to reduce the level of complexity of their service offerings; work on becoming culturally appealing; and partnering with local community-based organizations that serve as advocates for the Latino population. The report is available through the Filene Research Institute www.filene.org.

Credit reports in Spanish now available for mortgage pros

Informative Research introduced an online feature that allows mortgage professionals to view credit reports in Spanish.

The feature is available at no additional cost with regulator credit report orders, and can be accessed through the company's Web site. It was created in response to the demand from Spanish- speaking mortgage professionals.

The report feature needs no additional software or plug-ins. Originators with Informative Research accounts can follow the usual process of online credit report ordering, but they also can choose to view the mortgage report in Spanish.

"Relationship building is easier when both parties are speaking the same language," said Joe Allison, Informative Research sales manager.

Informative Research is working to develop similar features to allow users to view reports in other languages, including Vietnamese, Mandarin Chinese, and Korean.

Informative Research provides lenders with credit and mortgage-related information.

Sales of new vehicles on the uptick among Hispanics

Hispanic spending on new vehicles rose at an annual rate of 9.2% in 2005, according to the U.S. Department of Labor and the November 2007 issue of Hispanic Business. The overall national rate of new vehicle sales was 1.9% below the rate of inflation.

Hispanics spent roughly $22 million on new vehicles in 2005. And J.D. Power & Associates projects a 29% growth in sales to the Hispanic market by 2010. Hispanic buyers tend to be younger than other vehicle shoppers but a demographic profile of the market is hard to get. R. L. Polk & Co. notes that Hispanics buying luxury vehicles between 2002 and 2006 increased more than 50%, compared with 13% for the non-Hispanic market.

And a 2006 AOL Latino-Hispanic cyberstudy suggests that Latinos are more likely than the general online population to buy a new vehicle over the Internet. Hispanics are also more likely to locate a dealership online.

When it comes to a new vehicle purchase, Hispanic Business suggests price and monthly payments are the keys to purchase for the Hispanic market. Half of the Hispanics making new car purchases were college educated.

Overall, R.L. Polk & Co. says new vehicle registrations among ethnic groups increased nearly 11% between 2003 and 2006.

Short Takes

A 2006 survey by the Inter-American Development Bank found that illegal immigrants made up 41% of the Latin Americans in the U.S. who use money transfer companies. And Western Union is the biggest player, earning nearly $1 billion annually in its remittance business. With five times as many locations as McDonald’s, Starbucks, Burger King, and Wal-Mart combined, Western Union has 320,000 worldwide outlets. Critics have long complained about its fees, which can run from 4% to 20% or more on a transaction. Over the past four years, the remittance giant has spent more than $1 billion on marketing to change its image; retooled its pricing; and become very active in immigration politics. Still, it remains the most expensive remittance provider, the New York Times, says. Last year migrants sent home $300 billion …

Children account for 15% (1.8 million) of the undocumented workers living in the U.S. About 65,000 undocumented children who have lived in the U.S. for five years or longer, graduate from high school each year. Although they can legally attend most colleges, they are not eligible for most forms of financial aid. Right now only 5% to 10% of undocumented high-school graduates go to college, says Immigration Daily. Since 2001, 10 states have passed laws that allow undocumented students who graduate from in-state high schools to qualify for in-state financial aid programs …

Since 1990, Hispanic representation at colleges and universities has almost doubled. Latinos are 11% of total student enrollment. Yet, Hispanics receive the lowest average financial aid awards of any racial/ethnic group, according to a study by the Washington, D.C., nonprofit Excelencia in Education. Receiving a secondary education in the U.S. can drastically change one’s life. According to the Bureau of Labor Statistics, workers who lack a high-school education in 2006 earned an average of $419 per week and had an unemployment rate of 6.8% while workers with a bachelor’s degree earned an average of $962 per week and had an unemployment rate of 2.3% ...

Showing the spirit of cooperation, Truliant CU and Allegacy FCU in Winston-Salem, N.C., and Premier FCU in Greensboro met with a Mexican delegation of 11 to exchange information on accounting and information-technology systems, branches, and service. Caja Morelia reached a formal cooperation agreement with North Carolina credit unions that will involve sharing of information. Caja Morelia has 67 branches, 200,000 members, and $200 million in assets …

“Despite its downside, subprime lending has allowed significant numbers of Hispanics to take advantage of strong housing appreciation in several high-priced housing markets,” says Hispanic Business. In places like Miami and Los Angeles, two of the top 10 Hispanic demographic metropolitan areas, the average housing appreciation over the past five years was more than 80%. Still, the Center for Responsible Lending projects nearly 38,000 Hispanic families could lose their homes due to subprime lending …

“Nearly all Hispanic adults born in the United States of immigrant parents report they are fluent in English, while only a small minority of their parents describe themselves as skilled English speakers. This finding suggests a dramatic increase in English-language ability from one generation of Hispanics to the next. The report comes from a new analysis of six Pew Hispanic Center surveys conducted this decade among a total of more than 14,000 Latino adults. The surveys show that fewer than one-in-four (23%) Latino immigrants report being able to speak English very well. However, fully 88% of their U.S.-born adult children report that they speak English very well. Among later generations of Hispanic adults, the figure rises to 94%. Reading ability in English shows a similar trend” …

(updated October 31, 2007)

Credit card use among Hispanics

More than half of U.S. Hispanics have either a credit card or debit card, according to HispanTelligence.

The market trails the overall U.S. population by a little more than 13 percentage points (70% vs. 56.9%).

The incidence of credit or debit card use increases with household income, growing to nearly 66% in Hispanic households earning between $50,000 and $75,000 annually. The gap increases slightly among households earning $75,000 or more.

Visa has made the biggest inroads in the Hispanic market, with 37% having its card compared with 24% having MasterCard and 8.5% having American Express. Among Hispanic households earning more than $75,000 the numbers break down with Visa’s share 53%, MasterCard’s 38%, and American Express’ 45%, according to HispanicBusiness magazine.

Source: HispanTelligence® based on MRI 2006 Doublebase.

Spanish language radio talk shows gaining listeners

According to Arbitron’s 2007 report “Hispanic Radio Today,” the number of Hispanics listening to the 61 news/talk radio stations in the U.S. is up 9% from the spring of 2006. That would put listeners at about 1.76 million people.

The report does not track how many or what percentage of the nation’s 730 Spanish-language stations incorporate talk programming into their daily lineups.

According to Nielsen Monitor-Plus, eight of the top 10 Spanish-language radio advertisers increased their spending by double digits from 2005 to 2006. The Hispanic market has been one of the few areas of growth in media advertising sales, up 36% in 2006, says Nielsen Media Research.

Abritron’s 2007 report shows the Latino audience is gaining in affluence and education. News/talk shows in Spanish are one of the highest rated of 14 Spanish language formats, averaging 11 hours per week for listeners age 35 to 64. That’s up 15 minutes from 2002 data. Young Hispanics, age 12 to 24, spend twice as much time listening to Spanish talk than to English.

Talk show programs that focus on money management is growing, says adweek.com. And male and female Hispanic listeners are almost evenly split between men and women, says Arbitron.

Hispanic wealthy among fastest growing market niches

U.S. Hispanic households making more than $100,000 annually grew 126% in the past decade, says Hispanicbusiness.com.

And financial service center giants like Citigroup, Bank of America, and Merrill Lynch are targeting this market with customized programs. Goldman Sachs is reportedly planning to spend as much as $50 million over the next five years on marketing and advertising that targets Hispanics.

Merrill Lynch’s programming may be getting the largest footprint, recognition, or credibility with wealthy Hispanics. Hispanicbusiness.com divides wealthy Hispanics into four groupings: “heavy hitters,” ages 50 to 70 with $250,000 plus in annual income, who need estate and retirement planning; “young professionals,” ages 35 to 50, $175,000 in annual income, highly educated, in need of asset liability and financial planning help; “immigrant entrepreneurs,” ages 45 to 70, $150,000 in annual income, needing cash management, secure and protected investments; “small business owners,” ages 35 to 65, $750,000+ in annual sales, need retirement help, cash management services, prefer information in Spanish.

Tucson director describes visit to Ecuador

Frank Felix, a director at Arizona State CU in Phoenix, returned Oct. 7 from a summit in Ecuador for the exchange of cooperative financial ideas with worldwide financial leaders.

Frank Felix, left, Arizona State CU board member, discusses how credit unions can help the working poor with Father Hernan Rodas, chairman of Jardin Azuayo CU in Ecuador, as part of the World Council of Credit Unions Cooperative Learning Tour in Ecuador to exchange cooperative financial ideas. (Photo provided by Arizona State CU)

Felix, along with other CEOs, senior staff and board directors from Barbados, Canada, Scotland, Macedonia, California, Virginia, and Wisconsin participated in a weeklong dialogue with Cooperativa Jardin Azuayo (CJA) as part of the World Council of Credit Unions (WOCCU) Cooperative Learning Tour.

Felix and other credit union group members visited credit union business owners to see how their businesses had developed through access to financial services. Also, the group participated in a video conference at a credit union telecenter that offers wireless Internet access to the community through a program funded jointly by WOCCU and the U.S. Agency for International Development (USAID).

"Comparing our credit union system to those in Ecuador helped me see my job, my credit union and our national system in a new light," Felix said. "I found direct links to many things we are working on in our own credit union, such as direct banking, volunteer development, member involvement and more.

"It was especially helpful to do this as part of an international group so we could compare how other countries face similar challenges in management, lending and member service," he added.

CJA is a credit union founded to address community reconstruction needs following a landslide in 1993 that destroyed the town of Paute, Ecuador. CJA does no formal advertising, yet has grown to 85,000 members from 10,000 members in 2000 through word of mouth (News Now, 10/22/07).

CJA pays 250% of prevailing wages, yet has one of the lowest business operating costs in South America.

More than 350 women from 18 countries participate in a CJA indirect lending program with the Paute Women's Association. The program includes education, leadership and other elements that will support the women's businesses and families.

Other examples of CJA community partnerships include a $50,000 investment by a local municipality leveraged to create $150,000 in community loans, group lending to local agricultural communes and computer loans to area schools.

Online resource launched in Spanish

The National Homeowner Crisis Resource Center NFCC Helps Spanish Speakers in the U.S. who are in danger of losing their homes.

Following on the heels of its launch of the Homeowner Crisis Resource Center earlier this month (located at www.HousingHelpNow.org), the National Foundation for Credit Counseling (NFCC) has today launched a Spanish-language version of the site to assist others who may not be fluent in English.

This Spanish-language site can be found at www.nopierdastuhogar.org.

As more and more families find themselves caught in the squeeze of variable rate mortgages with rising costs, they quickly are realizing that they simply cannot afford the mortgage payments. The number of foreclosed homes in the first six months of 2007 surged by 58%, putting approximately 573,000 homes at risk. And there may be more bad news ahead because another two million mortgages will reset over the next 18 months.

Additionally, the NFCC's 2007 financial literacy consumer survey revealed that 15% of Latinos do not know the interest rate on their mortgage. Nearly half of all Latino respondents to the survey indicated a desire to improve their financial literacy.

WOCCU immersion worthwhile experience, exec says

It’s a big investment in time and money, but Caite Blount, vice president of marketing at Texas Dow Employees (TDECU), Lake Jackson, Texas, thinks the World Council of CUs “Total Hispanic Immersion Program” was worth the investment.

Small group dialogues, visiting different caja branches in a variety of communities, specialty presentations on marketing, community relations, and public relations are just a few of the experiences. The two-week program at four credit unions in Mexico included daily Spanish lessons, cultural experiences like living with a local family, learning specific business and operational practices at various caja’s, and a chance to visit with some of the caja’s commercial clients. “Banks and credit unions have both had failures in Mexico, so building trust in our ‘insured system’ and our particular institutions is important, especially for our mortgage products,” she says.

“We can ‘capitalize’ on some additional public relations and promotional value by tapping into some holidays that are an important part of their culture.” Mothers Day and the Day of the Children, are two events she cited. "Our physical presence needs to be different in the office--we need to be less imposing and more open."

And what can U.S. credit unions learn from caja operations? “The Mexican consumer has a better understanding of the community charter concept than U.S. consumers because membership has always been open to the total population vs. SEG based membership.”

Texas CU offers learning program to Mexican nationals in U.S.

West Texas CU signed a partnership with the Mexican Consulate in El Paso to provide free educational opportunities to Mexican nationals residing in the U.S.

This is the first partnership between the consulate and a U.S. financial institution.

West Texas CU's "Plaza Comunitaria," a learning program offered by the Mexican government, will offer instruction on literacy, elementary and secondary education.

Plaza Comunitaria is for those interested in furthering their education to improve life and work; improving native-language speaking, reading and writing skills; obtaining official education certificates from Mexico; and earning a general education diploma.

Classes will be held in the credit union beginning next month.

West Texas CU also has earned the "Juntos Avanzamos" designation, which indicates to Texas Hispanics that they can receive affordable financial services at the credit union. "Juntos Avanzamos" means "Together We Advance" and is an outreach program of the Texas Credit Union League.

West Texas CU has $76 million in assets (News Now 10/23/07).

Do affinity-based work groups have a place at your CU?

Should your credit union start an affinity group for Hispanics?

According to a 2005 Workplace Diversity Practices survey by the Society for Human Resources, affinity groups are critical tools that some companies are using to help reduce turnover costs and improve worker productivity. While affinity groups are growing in the workplace, only 29% of companies in the survey supported employee network groups.

Affinity groups for women’s networks have made inroads in many companies but now affinity groups for Hispanics, African-Americans, Asians are gaining ground among larger employers. Affinity groups at work can help employers better understand the needs and tastes of various employee (and customer) segments.

For smaller companies--and many credit unions--encouraging informal networking through focus group meetings, brown bag lunch meetings, and as part of an overall diversity committee might be the best way to start out.

Of course, affinity workplace groups are not without their critics. Some observers believe they divide rather than unite workers. Companies often worry that groups will spend time complaining about the organization, lowering morale or even encouraging lawsuits. Other companies worry that the groups may evolve into unions. In a high profile case in 2004, General Motors won a lawsuit when an employee that took umbrage with the company’s refusal to support a Christian employee resource group.

If you are contemplating promoting an affinity group offering at your credit union, be sure you develop a communications plan that establishes the purpose of the gatherings, and that anyone who wants to join, can. You want employees to understand that the gatherings are to encourage a balance between workers’ needs, and your organization’s objectives.

Short takes

• From 1997 to 2006, the number of Latina-owned firms increased by 121%, according to a study by the Center for Women’s Business. As of 2006, 745,246 firms were owned by Latinos employing 277,683 people and generating nearly $46 billion in sales the study says. The most dramatic growth has occurred in Arizona, California, New Mexico, and Texas …
• Remittances exceeded $58 billion in 2006. And in at least six countries, remittances account for 10% of the GDP, says latinbusinesschronicle.com. Mexico accounts for 40% of remittances to South America and it reported 15% growth in 2006. The white paper, “Understanding Remittances”, suggests a recent reported downturn in remittances is not as drastic as is being reported. The author, Jan Smith of InfosAmericas, says historical growth rates of remittances from 2000 to 2006 were inflated by positive effects from improved reporting mechanisms. The strong demand for cheap labor in the U.S. will continue to keep the remittance market growing …
• Some lenders are using an uptick in the cost of applying for U.S. citizenship as a lending opportunity. The American Banker (8/20/07) reports a number of banks and at least one credit union are offering citizenship loans to court Hispanic customers and members. North Side Community FCU, Chicago, is one of the lenders the article cites. The credit union works with other nonprofits in the community for referrals. The cost of applying for citizenship increased to $675 in July, a 70% hike …
• Solara National Bank, Lakewood, Colo., is the first new nationally chartered bank in Colorado in six years. Its target audience: 35,000 businesses that have $17 billion in spending power in the state …
• “Building a Better Future” is the name of the Latino Community CU’s financial education program that targets recent immigrants with little or no financial experience. The program includes six workshops covering basic financial management topics such as managing a checking account, debit cards, budgeting, credit scores, credit cards, home buying, and car buying …
• Promoting outreach activities to diverse populations was part of the job description at Truliant FCU, Winston-Salem, N.C., when Majorie Rorie started working at the credit union. As the credit union’s director of community relations position, Rorie and Truliant have opened several new Member Financial Centers (The AC Phoenix). Using a grant from the National CU Foundation, Truliant is sponsoring a financial education programs for youth, Hispanics, and people of modest means …
• First Community CU, Beloit, Wis., is part of the Latino Service Providers Coalition, an umbrella organization of about 20 people and organizations that serve the Hispanic community. The coalition works as a clearinghouse for information that maintains an online referral center at horc.us, helped arrange a visit from the Mexican Consulate, and provides editorial content for an area Spanish-language newspaper …
• Confusion and uncertainty about financial matters are common in the Hispanic community, so some groups--like Voices Without Borders in Delaware--are partnering with local groups to offer “money fairs”. The events are aimed at letting Latinos know about their financial options, access to capital, and entrepreneurship opportunities (www.delawareonline.com) …
• Mistakes many firms make when reaching out to the Hispanic market: Not recognizing how diverse it is; not having staff members of Hispanic origin to help avoid cultural pitfalls; not knowing whether your target market is first-, second-, or third-generation Hispanic. While 70% of the U.S. Hispanic market does come from Mexico, that culture is not dominant in all American communities. More than half of the 2.3 million residents of San Antonio, for example, are Hispanic, but three- quarters of the Hispanics there have been there for generations, says “Lost in Translation: Every Market is a Culture” at adotas.com …
• By 2009, one person out of every six living in the U.S. will be of Hispanic origin, up from one of every eight in 2000, says a report called “The Multicultural Economy, 1990-2009, from the Selig Center for Economic Growth …

(updated September 24 2007)

Rethink minimum account policies to reach Hispanic market

The Tomas Rivera Policy Institute says financial institutions wanting to reach the Hispanic market should consider lowering their minimum balances for checking and savings accounts and offering more cash-based services.

The Institute, headquartered at the University of Southern California, also predicts the Hispanic middle class will rise over the next 10 years.

U.S. Census Bureau data show that 36% of Hispanic households have middle-class wealth. While nearly 60% of all Hispanics with less than $25,000 or less are foreign born, those earning more than $25,000 are mostly native born.

Hispanics earning more than $250,000 annually tend to be well-educated, according to Rogelio Saenz, a sociology professor at Texas A&M University. The number of Hispanics who earn at least $100,000 and have a minimum of $500,000 in assets is growing eight times faster than the number of non-Hispanics with the same economic profile, according to the Institute.

The U.S. Chamber of Commerce says by 2010, there will be 3.2 million Hispanic-owned businesses, generating $465 billion.

Hispanic seniors dependent on Social Security

AARP reports more than half of American Hispanics would live below the poverty line without Social Security benefits.

With defined benefit programs on the decline, Social Security income is the only source of income for many older Hispanics. Social Security provides benefits to almost 75% of older Hispanics and represents the largest single source of retirement income for this group, AARP says. Social Security payments represent half of the income for almost 80% of Hispanics age 65 and older who receive them.

AARP’s study of Hispanics age 65 and older reports this market segment is twice as likely to live in poverty than other Americans in that age group.

AARP called for increased emphasis on financial literacy and is promoting IRA legislation that asks employers with at least 10 employees to facilitate direct deposit payroll deductions to an IRA.

Group supports mortgage lending changes

The comprehensive FHA reform legislation that is moving through Congress has the support of Hispanic realtors.

In a survey of 700 Hispanic real estate professionals conducted by the National Association of Hispanic Real Estate Professionals (NAHREP), 96% said they favored comprehensive FHA reforms.

The survey follows up on a focus group study the NAHREP conducted earlier in September. That effort, conducted in six U.S. cities that have a high concentration of Hispanic homeowners, suggests that Hispanics are at greater risk for unscrupulous mortgage products than other demographic groups.

The joint report issued Sept. 12, from the National Association of Hispanic Real Estate Professionals (NAHREP) and the National Council of La Raza heard from brokers from Dallas-Fort Worth, Houston, Chicago, Miami, Los Angeles, and San Jose, Calif.

The report draws a link between high-cost subprime mortgage loans and foreclosures, noting that Hispanics are overrepresented in both categories. That claim was reinforced by Federal Reserve data released this month.

The Fed report showed blacks and Hispanics were far more likely than whites to take out higher-cost subprime mortgages in 2006 and that as many as two million homeowners—many in minority neighborhoods—are at risk of foreclosure.

According to the Fed, 53.7% of blacks who took out mortgages to buy homes in 2006 used higher-cost loans, compared with 46.6% of Hispanics and 17.7% of whites. These racial disparities narrow when adjusted for such factors as income, the amount borrowed, lender characteristics and loan-to-value ratios, but cannot be explained completely, the Fed said. The gap between blacks and whites narrows from 36 percentage points to about 13 percentage points when other factors are included. The unexplained difference between Hispanics and whites shrinks to about six points.

“Saving Homes, Saving Communities: Latino Brokers Speak Out on Hispanic Homeownership,” says licensing and certifying standards for mortgage brokers are not rigorous enough. Additionally, it says there are not enough home loan products that meet the unique needs of the Latino community. And it suggests external factors such as broker compensation structures and secondary market decisions affect the mortgage products that are available.

The NAHREP report calls on lenders to make more affordable loans and make sure borrowers can afford to repay these loans through the early years of the loans. The report encourages lenders to partner with reputable home ownership counseling providers to educate borrowers who are not ready for home ownership.

Finally, the report calls for incentives to create affordable mortgage products, rather than the current practice of providing incentives to brokers for high-cost loans.

Wal-Mart makes gains in Texas’ Hispanic market

In North Texas, Wal-Mart is making gains in attracting Hispanics in several markets—groceries, home appliances, and children's clothes—with one major exception: financial services.

Credit unions were listed in fifth place in market share by Hispanics who indicated which financial institution handled most of their financial needs, according to the Dallas-Fort Worth Latino Trendline survey (The Fort Worth Star-Telegram Aug. 6).

The survey is annual study by Rincon & Associates, a Dallas market research firm.

In the area, Bank of America captured the largest financial services market share with 25.6% of the Hispanic market; followed by Bank One/Chase, 16.5%; Wells Fargo, 8.7%; Washington Mutual, 4.3%; and credit unions, 3.6%.

Wal-Mart made surprising inroads in the area of groceries, according to a poll of area Hispanic shoppers. Hispanic shoppers ranked Wal-Mart as the top destination for groceries, beating out Hispanic market niche favorites Fiesta and Carnival for the first time in the history of the survey.

Wal-Mart jumped from the ninth most-visited grocer in 2001 to fourth place in 2004, third place in 2005, and first place this year, with 23.5% of the market share.

For home appliance shopping, Wal-Mart's market share was 14.5%--second place behind Sears. For children's clothes, Wal-Mart was again in first place, with almost 30% of the market (News Now Aug. 13)

Use of Internet among Hispanics soars

Half of Hispanic adults are online, according to updated information from the Pew Internet & American Life Project.

Over the past 12 months, the online Hispanic population grew 25% the study suggests. While Hispanics are less likely than whites to make online purchases, they are just as likely to have performed online banking and online stock trading.

According to the study:

• 41% of online Hispanics have bought something over the Internet compared with 49% of online whites.
• 20% of online Hispanics have done online banking compared with 17% of online whites.
• 12% of online Hispanics have bought and sold stocks compared with 13% of online whites.
• 9% of online Hispanics have participated in an online auction compared with 17% of online whites.

One-third of the Hispanic respondents to the study say the Internet has helped them manage their finances.

Short takes

The Texas Credit Union League (TCUL) has awarded the Juntos Avanzamos designation to Amarillo Community FCU in Amarillo, Texas. The designation, which means "together we advance" in Spanish, is a signal to the Hispanic community members that they can receive affordable financial services from the credit union (LoneStar Leaguer Sept. 13). Amarillo is the 10th credit union in Texas to receive the designation …

Hispanics, blacks, low-income individuals, and single females bear a disproportionate amount of credit card costs, says the New York-based think tank Demos. About one-third of credit cardholders pay interest rates in excess of 20%. And cardholders with annual household incomes between $25,000 and $50,000 are almost two times as likely as annual household incomes between $50,000 and $100,000 to pay interest rates of about 20% …

Just 40% of Hispanics are covered by insurance provided by their employer, compared with 20% of blacks, and 66% of white Americans …

Foreign-born Latinos, especially the newly arrived, were much less likely to be low-wage earners in 2005 than in 1995 …

There are 160 credit unions across the country that are offering Home Loan Payment Relief (HLPR) mortgages for borrowers with household incomes at or below the median incomes in their local markets ...

Hispanics now operate more than 50,000 farms in the United States and they are the fastest-growing sector of the farm economy. From 1997 to 2002 their numbers increased by more than 50%. Agriculture Secretary Mike Johanns expects that the 2007 agriculture statistics will show an even greater increase…

(updated August 9, 2007)

1 in 12 has no formal banking relationship

One in 12 families in the U.S. does not have an account at a traditional financial institution.

That number is higher for poor people, where 25% of families earning less than $18,900 annually do not have a formal account relationship.

Where do these groups go for help? Many turn to check-cashing outlets. What do they like about doing business there? They like the 24/7 hours. They like knowing up front exactly what they will be charged to cash a paycheck, to buy a money order, or to wire money to another country.

What don’t they understand about that process? Consumer Federation of America (CFA), Washington, D.C., believes these consumers do not understand how expensive those services can be. CFA’s survey of check-cashing study found that it costs an average of $24.45 to cash a $1,002 Social Security check and workers spend an average of $19.66 every week to cash checks valued at an average of $478.41.

Credit unions and other financial institutions are very interested in tapping into the unbanked market, which includes many Hispanics. The 10 million to 28 million people outside the mainstream financial market earn an estimated $510 billion annually. Wal-Mart obviously sees the profit potential in serving this market, as it recently announced plans to sell prepaid Visa debit cards.

The Federal Reserve System recently identified 3,500 middle-income neighborhoods in rural areas that the Fed says are underserved by financial institutions.

Home loan discrimination charges surface, again

A Fed study of 2006 home loans found 55% of blacks and 45% of Hispanics received home loans with rates that exceeded the rates on Treasury securities by at least three percentage points. Only 17% of white borrowers had similarly priced mortgages.

Consumer groups say the data show discrimination. Banking groups say the data is misleading because it does not examine buyers’ credit scores, home quality, down payment size, and other variables.

With foreclosure rates soaring as a result of exotic mortgage instruments used in the past few years, the Justice Department is going to expand its investigations. The mortgage market troubles are expected to cost two million people their homes before the market hits bottom. Subprime loans accounted for more than half of the home foreclosures in the fourth quarter of last year.

A recent Harris Interactive Poll of 2,383 adults showed only about one of four respondents had favorable perceptions about mortgage ads.

Hispanics often victims when phone cards don’t live up to billing

Some providers in the $4 billion prepaid phone card business are under attack that their marketing tactics may be short-changing consumers and Hispanics may be particularly vulnerable.

Newark, N.J.-based IDT Corp. claims nine of its rivals are marketing prepaid cards that deliver only about 60% of the time promised. IDT Telecom estimates the practices may be costing consumers $1 million a day while cutting into IDT's sales.

Prepaid phone cards are particularly popular among new immigrants, older people, and other low-income consumers who are least able to afford conventional phone service. Prepaid phone cards are sold at many locations including newsstands, post offices, travel agencies, retail stores, and grocery and convenience stores. Some are used as incentive giveaways as well. They are used mostly by travelers, students, and people who may not have long-distance telephone service.

Some prepaid phone cards can be refilled, usually by charging the additional cost to your credit card. And some cards have features like speed dialing for frequently called numbers and an activity report of called numbers, which may be handy for business purposes.

Hispanics may be particularly vulnerable since many buy prepaid cards because they are unable to show the documentation needed to have conventional phone service.

Already, three providers have settled out of court with IDT. Epana Networks, Dollar Phone, and Locus Telecommunications have denied any liability and made no payments but have agreed to change their marketing messages.

At issue are unmentioned fees on card users that may reduce the value of these cards, trimming off 10% to 20% or more of the minutes a consumer may buy. According to a 2005 study by associate professor Julia Marlowe at the University of Georgia, these fees typically are connection, service, and maintenance fees hidden in the hard-to-read fine print on the back of phone cards. But there are often other undisclosed fees as well.

Only 11 states have laws on calling cards. Most states rely on generic consumer protection regulations.

These are among the tips to share with your membership. They come from the Federal Trade Commission:

• Ask if the retailer will stand behind the card if the telephone service is unsatisfactory.
• Look for the rate for domestic and international calls on the card’s package or on the vending machine. These rates may vary depending on where you call. If you can’t find the rate, call the card’s customer service number.
• The prepaid phone card industry is highly competitive. But very low rates, particularly for international calls, may indicate poor customer service.
• Look for disclosures about surcharges, monthly fees, per-call access, and the like, in addition to the rate-per-minute or unit. Some cards add a surcharge to the first minute of use. Others charge an activation fee for recharging cards.
• Check on expiration dates. Most cards expire one year after first use. If there is no expiration date, a card usually is considered “live” until all phone time is used.
• Look for a toll-free customer service number. If the customer service number isn’t toll-free or displayed, it may be difficult to contact the company if you have a problem with the card. A busy signal on the customer service line may be a tip-off to a rip-off.
• Be sure the card comes with instructions that you understand.
• Make sure the card comes in a sealed envelope or has a sticker covering the PIN. Otherwise, anyone who copies the PIN can use the phone time you’ve already paid for.
• Ask friends and relatives about their experiences with the card you’re thinking of buying.

Minorities less likely to start a business, study says

Hispanics have about a 55% lower chance of opening a business than a nonminority says a new study.

“The Effect of Wealth and Race on Start Up Rates” was conducted by Maritza Salazar, a New York University doctoral student, who was working with the Small Business Administration. Salazar told WashingtonPost.com that families that are not wealthy are much more cautious about the amount of risk they will accept when going into business. She opines that people in the top 25th percentile in wealth are more likely to become entrepreneurs.

Black-owned businesses are the fastest growing sector of new business start-ups, according to data from SCORE, a provider of small business advice. About 38% of black-owned businesses are owned by women. SCORE reports there are 1.6 million Hispanic-owned businesses in the U.S., a 31% increase since 1997.

Short takes

• The Employee Benefit Research Institute, Washington, D.C., says fewer people are saving for retirement. Since 2003, EBRI says the percentage of Hispanics saving for retirement fell from 60% to 41%; African-Americans saving for retirement fell from 62% to 48%, and the general population fell from 71% to 66%. Among all workers, 13% had $50,000 to $99,999 saved vs. only 7% of Hispanics and blacks …
• Brandweek.com says the recent Pew Hispanic Center study “Changing Faiths” is a lesson for those who subscribe to the “naïve Hispanic Marketing 101 myth that Latinos are uniquely brand loyal and willing to give products years of their unconventional support.” While the study does show Hispanics as deeply religious, it also reports that Latino Americans are abandoning the Catholic Church in significant numbers. Brandweek’s take on that news: “If Latino’s (whose buying power is expected to reach $1.2 trillion by 2011) are willing to reassess what organized religion they subscribe to, would they be unwilling to apply the same kind of scrutiny to the brands they buy?” …
• Some 1.5 million Hispanic households will buy homes by 2010 and the number could climb even higher if lenders offered bilingual outreach, counseling, and access to innovative mortgage products, according to the Tomas Rivera Policy Institute and a new book called “Hogares para Hispanos” (Homes for Hispanics) …
• Educating Hispanics about credit scores and their impact became even more obvious after the Federal Trade Commission released its controversial findings on credit-based insurance scores and automobile insurance. In a study Congress mandated, the FTC reported credit scores are effective predictors of the claims consumers will file and the total cost of those claims. Consumer advocates say credit scores do not accurately predict a person’s insurance risk and discriminate against low-income and minority consumers …
• Minorities represent one-third of the U.S. population now and will become the majority group by 2038, according to the U.S. Census Bureau …

(updated June 22, 2007)

Reaching Latino market will take one-on-one education

It will take individual, one-to-one financial education to educate many Latinos about savings deposits being federally insured, says a new white paper, “Opening Your Branches to Latinos: Understanding How to Earn Trust and Gain Acceptance.” The IBT Enterprises’ white paper is available in the Hispanic Resource Center’s File Resource Library.

More than half (56%) of the Latino community in the U.S. does not have an account relationship with any American financial institution. The five-page white paper highlights some of the issues credit unions will have to overcome to serve this market. Latinos believe:

• They do not have enough money to open accounts.
• They will pay large penalties and fees for overdrafts.
• Most financial institutions do not offer convenient hours.
• They will not qualify for traditional credit given their limited credit histories.
• Their financial matters will be disclosed to authorities.
• Their deposit accounts will be subject to creditor liens.
• They do not have proper documentation or classification to open an interest-bearing account.
• To earn the trust of this community, the commitment must be genuine at both the individual and group level,” the report says.

Growth initiative discussed between U.S., Mexican credit union groups

Credit union executives from the U.S. and Mexico are working on problems common to both countries—growing credit union membership.

At a recent meeting organized by the World Council of Credit Unions, representatives from the California and Nevada Credit Union Leagues, the Arizona Credit Union System, the New Mexico Credit Union Association, and the North Carolina Credit Union League met with representatives of four Mexican caja populares.

The representatives at the meetings agreed to work in four broad areas—enhanced service delivery channels, particularly credit card services, international shared branching, and international remittances; internships between U.S. credit union organizations and caja populares in Mexico to promote exchange of technical expertise; marketing and service to Hispanics in the U.S.; and cross selling the credit union difference in both countries.

WOCCU announces Hispanic Market Immersion Program

Victor Corro, manager of international partnerships at the World Council of Credit Unions, has announced a new hands-on internship program in Mexico.

This program offers a live-in experience with a stay at a prescreened host family to experience the daily lifestyle and cultural traditions of a Mexican family. Participants will begin each day with four hours of Spanish language instruction customized to their ability. During the afternoons, participants will work at a local credit union branch to interact with management, staff, and members.

The internships will be at a branch of Caja Popular Mexicana, Caja Alianza, Caja Libertad or Caja Morelia Valladolid, Corro noted. The deadline for registration is July 31 and the first session is scheduled to run from Sept. 15 to Sept. 30.

For more information contact Corro at vcorro@woccu.org.

Hispanic investors offer market potential

There is an emerging market of Hispanic investors that financial groups are trying to tap into.

The following are some insights into the Hispanic market from HispanicBusiness.com. Statistically, the typical Hispanic investor:

• Represents a growing economic segment. Census Bureau data indicate that 16.5% of Hispanic households fell in the $100,000-plus net worth brackets as of 2000, up from 11.5% in 1995.
• Has about 7.3% of his/her wealth in a 401(k) account, and about 7.2 % in stocks or mutual funds, according to the 2004 Pew Hispanic Center study, The Wealth of Hispanic Households: 1996 to 2002. By contrast, only 2.9% of Hispanic wealth, on average, is invested in an individual retirement account or a Keogh plan.
• Owns a home and "interest-earning" assets, such as a savings account or certificates of deposit. These two asset classes represent the favorites of Hispanics, owned by 47.3% and 42.4% of households, respectively, the Pew study reports.
• Ranks among the wealthiest segment of the U.S. Hispanic population. The Pew study found the top 25% of U.S. Hispanics control 93% of this market's wealth.
• Geographically, 45% of affluent Hispanic households are concentrated in five key markets: New York, Los Angeles, Miami, Chicago, and Houston.

Additionally, HispanTelligence data show that:

• Miami has the highest concentration of upscale Hispanics, with 10.1% of Hispanic households in the $100,000+ income bracket.
• In Los Angeles, 8.5% of Hispanic households reach the same category.
• Chicago has the highest proportion of Hispanics (50.4%) in the middle income bracket, defined as $35,000 to $99,999.

Tips on reaching the Hispanic market

According to Mayrah Rocafort-Mercado, vice president of marketing and sales for La Canasta de Valores, at ADS Direct Media, communicating with the Hispanic market requires following some basic principles:

• Educate the market about your products and services, but don’t assume they are familiar with your offerings.
• Use culturally relevant messages and images that sell the benefits of working with your credit union. Family oriented messages work well.
• Make your communication efforts bilingual as Hispanic households are multigenerational and levels of acculturation vary within each home.
• Use a No. 10 envelope when making financial service offerings because Hispanics perceive these offers as serious and institutional.
• Instant discounts have a higher response rate than mail-in offers.
• Expect telemarketing and in-office sales efforts to last longer than average.

Hispanic market draws more media interest

Use of television, Web sites, and magazines to teach financial literacy to Hispanic immigrants is growing.

“Nuestro Barrio” is a 13-episode, Spanish-language telenovela--prime time dramas akin to English- language soap operas--that also are filled with some useful information such as how to shop for a mortgage. Freddie Mac helped fund the production of the telenovelas that feature six episodes dealing with home ownership, credit, predatory lending, or foreclosure.

And Julie Stav, owner of Tu Dinero, a Spanish-language personal finance magazine, is planning to join forces with ImpreMedia to launch Tu Dinero Online. ImpreMedia will deliver Tu Dinero Online's branded content under the name of "Tu Dinero con Julie Stav" juliestav.com/home.php.

Content from Tu Dinero will appear in the following ImpreMedia print publications and related Web sites, including La Opinion in Los Angeles; El Diario La Prensa in New York City; and La Raza weekly in Chicago.

And Casa y Communidad: Latino Home and Neighborhood Design, edited by former HUD Secretary Henry Cisneros and John Rosales has been published by the National Association of Home Builders.

Meanwhile, the Congressional Hispanic Caucus Institute, Washington, D.C., announced its plans to offer a 24-page comic book novella, True Life Stories www.chci.org that address financial literacy issues for Hispanics.

And CUNA also offers a number of resources to help you serve the financial literacy needs of your membership finlit.cuna.org that promote use of your credit union’s service offerings.

Short Takes

• After increasing an average of more than 23% per year since 2000, remittances for the first two months of 2007 were just 5.5% ahead of 2006. Analysts say tougher border enforcement and workplace crackdowns may be playing a role, but the remittance slowdown has moved in lock step with the stumble in U.S. home building …
• What has made the Hispanic market so attractive to the financial services industry is not just the rapid growth in population, but buying power. Buying power is increasing at a faster pace their sheer numbers--rising 2.5 times faster than the buying power of the general population, according to the Selig Center for Economic Growth …
• There were 15.7 million Hispanic Internet users in the U.S. in 2005, rising to 16.7 million in 2006, according to eMarket.com. The number of users is expected to grow to 20.9 million in 201. About 56% of Hispanics in the U.S. use the Internet, compared with 71% of non-Hispanic whites and 60% of non-Hispanic blacks, according to the Pew Internet and American Life Project. But the number of Hispanics online jumps to 67% among 18- to 27-year-olds--the group most likely to visit social-networking sites …
• A Consumer Federation of America analysis of recent Federal Reserve Board Survey of Consumer Finances data found African Americans and Hispanics paying higher loan rates for new and used autos than white Americans paid in 2004. On 2004 loans for new-car purchases, blacks paid a median interest rate of 7%; Hispanics, 5.5%; and whites, 5%. On used cars, blacks paid a median rate of 9.5%; Hispanics, 9%; and whites, 7.5% ...
• More than 20% of children in the U.S. are foreign-born or have a parent who was born abroad. In fact, the nation’s minority population represent about one in three of all Americans, the Census Bureau reports …
• The Nielsen Company, working with Phoenix Multicultural, is developing a national Homescan Hispanic Consumer Panel that will sample 11,000 Hispanic households to develop insights into the needs, preferences, and shopping habits of Hispanics …
• Census Bureau figures show that as of 2000, Hispanic households had a median income of $33,400, African American median household income was $30,400 and white non-Hispanic households earned $45,900 …
• According to the Census Bureau, in 2000, the latest year for which figures are available, the median, white non-Hispanic net worth was $79,400. In comparison, the net worth for African- American households was $7,500 and for Hispanic households the total was $9,750.
• "Most rental property owners," says the Census Bureau, "were white (85%). black or African- American individuals owned 8% of multifamily properties and Asian or Pacific Islanders owned 4%. Hispanic individuals (who may be of any race) owned 6% of multifamily properties. This disparity in ownership between whites and minorities grew larger as the property size increased. Whites owned 93% of large multifamily properties, while Blacks and Hispanics owned only 1% and 2% respectively" …
• "Black and Hispanic borrowers taken together are much more likely than non-Hispanic white borrowers to obtain credit from institutions that report a higher incidence of higher-priced loans," reports the Federal Reserve. "On the one hand, this pattern may be benign and reflect a sorting of individuals into different market segments by their credit characteristics. On the other hand, it may be symptomatic of a more serious issue. Lenders that report a lower incidence of higher-priced products may be either less willing or less able to serve minority neighborhoods. More troubling, these patterns may stem, at least in part, from borrowers being steered to lenders or to loans that offer higher prices than the credit characteristics of these borrowers warrant …"
• Think you are being a trendsetter by offering credit cards to people without a Social Security number? While a Bank of America announcement that it was about to do just that this past spring drew some protests, Citibank has offered a secured MasterCards for at least three years. Wells Fargo Bank and First American Corp. have also made it easier for immigrants, legal and illegal, to get financial services. Studies suggest that 60% of first time homebuyers will be Hispanic by 2010 …
• According to the Project for Excellence in Journalism's Talk Show Index, in the period from May 13 through June 8, 2007 the immigration debate was the second-most popular talk topic (18%), narrowly trailing the presidential race (21%) and doubling the time spent on the next biggest subject, the Iraq policy debate (9%). The saga of Paris Hilton was the fourth biggest talk topic at 9%. While the amount of time devoted to the immigration debate is telling, equally revealing is the question of who talked about it. In that 26-day period, the airwaves were dominated by talk show hosts opposed to the legislation who often referred to it with the "amnesty bill" …

(updated March 14, 2007)

Credit card protections, education needed for Latino market

The National Council of La Raza (NCLR) has released a report that found that unfair and abusive credit card policies and practices trap Latinos in a cycle of debt.

The report, Latino Credit Card Use: Debt Trap or Ticket to Prosperity?, examines practices in the credit card industry, and shows that Latinos need greater access to affordable credit.

“It is essential that Latino families have access to affordable credit in order to move into the ranks of the middle class,” said Janet Murguía, NCLR President and CEO.

The report says harmful credit card industry practices are affecting Latinos. The report claims credit card issuer policies and fees are exacerbating the financial problems of many Latino families who depend on credit cards to make ends meet. Almost 39% of Latinos reported basic living expenses and 30% reported medical expenses as contributing to their household debt.

Among the major findings include the following:

• While credit card use among Hispanics is on the rise, many Latino households still do not have access to credit. Only 56% of Hispanic households have credit cards, compared to 80% of all American households.
• Credit card debt is on the rise in the Hispanic community. Between 1992 and 2001, the share of Hispanic families who held credit cards grew from 43% to 53%, and the average credit card debt among Hispanics increased by nearly 20% for that same period.
• The majority of American households who use credit cards do not carry a balance, but most Latino credit card users do. More than 45% of credit cards users report revolving a balance compared to 77% of Latinos.
• A substantial share of all credit card users and a proportionately larger share of Latino credit card users have difficulty managing their credit card debt. A recent Demos study on household debt showed that while 7.3% of all respondents were “maxed out and can’t use [their cards]” and 12.7% characterized their debt situation as “burdensome and not enough money to pay down [the balance],” 11.4% of Hispanics reported they were “maxed out and can’t use [their cards],” and 19.3% of Hispanics described their situation as “burdensome and not enough money to pay down [the balance].”

To address these disparities, the report recommendations include requiring a monthly minimum payment warning in credit card statements; banning unethical and harmful industry practices; and requiring regulators to set higher standards for the industry. Finally, policy-makers must support community-based financial counseling programs to help consumers distinguish between good and bad debt.

For a copy of Latino Credit Card Use: Debt Trap or Ticket to Prosperity?, visit NCLR’s website at www.nclr.org.

(updated January 10, 2007)

Customer service, specialized marketing key to Hispanic outreach

Customer service and specialized marketing are key elements of any strategy to win over the Hispanic market, according to a new report from Javelin Strategy & Research.

Unbanked and underbanked Hispanics have completely different financial service needs and expectations than other ethnic populations, the report says. Keys to serving this market: Placing personalized customer service ahead of pricing considerations and reaching out to this market through trusted community and civic organizations to establish relationships above and beyond a financial agreement.

“Microtargeting” is required for a number of Latino market segments and national origin is an important factor in that marketing effort. Cash alternatives are very appealing to this market, which requires considerable flexibility. The $950 report mentions the outreach efforts of Alternatives Federal Credit Union, Bethex Federal Credit Union, and Bank of America.

For more information about the report visit the company’s Web site or call 925-225-9100 ext. 26.

CSS, IBT partner on Latino outreach program for CUs

Credit unions will have help to tailor their products and services for the underserved Latino community through an expanded agreement between IBT Enterprises, LLC, and CUNA Strategic Services.

Under the new program, credit unions can reach out to the Latino market by offering needed products and services in a welcoming environment, focusing on: promoting financial literacy, providing culturally sensitive branches, and offering traditional and nontraditional banking products, including check-cashing services, at fair fees. The program also offers performance training and consulting for in-store associates and managers.

“As credit unions strive to reach out to the underserved, IBT’s knowledge of the Latino community and their specific service needs will undoubtedly prove worthwhile to supporting this effort,” said Wes Millar, senior vice president of CUNA Strategic Services.

“This program allows credit unions to more easily expand into new growth markets and obtain a more visible presence in underserved communities, while helping Latinos become full credit union members and take advantage of mainstream financial services,” said Mylle Mangum, IBT CEO. “We look forward to helping credit unions expand their presence, reach new markets, and achieve their strategic service and growth objectives.”

In a recent study of 12 branches in the Atlanta area, IBT measured fee income per branch for the month of August 2006 on four services—check cashing, phone cards, memberships, and ITINs. The average fee income per branch was $12,846 for check cashing, $3,624 for phone cards, $1,491 for memberships, and $2,704 for ITINs.

IBT is conducting free Webinars for credit unions. For information about the Webinars visit www.ibtenterprises.com/webinar.html.

For more information, go to strategicservices.cuna.org, or contact Shirley Mazanet at 800-356-9655, ext. 4290, or by e-mail at smazanet@cuna.coop.

“Sigo” stored-value debit card for unbanked Hispanic workers

Up to 30 million unbanked, foreign-born workers are the prime market for a new stored value debit card called “Sigo”.

The brainchild of the Center for Financial Services Innovation in Chicago, “Sigo” is a reloadable stored value card that enables immigrants without checking accounts or credit cards to keep their cash somewhere safer than at home under the bed. Users can reload the cards by having paychecks deposited directly into their accounts or by making cash deposits—for fees ranging from 50 cents to $5—at a local pharmacy or worker center. The Sigo card requires a PIN and is affiliated with MasterCard and can be used anywhere MasterCard is accepted. Cardholders face a maximum $50 liability if their cards are stolen.

Right now about 200 immigrant workers in Chicago, Los Angeles, and Hempstead, N.Y., are using the cards that have been made available by New Labor work centers. Organizers hope to make the cards available at 140 work centers around the country in the next couple years.

The cards cost about $4.95 to start and $2.50 per month per card. The work centers are splitting the cost with IDT Corporation, a Newark-based company that specializes in phone cards. IDT administers the card for the work centers. Grants from the Ford Foundation and the Center for Financial Innovation helped fund the initial offering. Rutgers University Labor Relations Professor Janice Fine helped develop the product launch.

Program administrators say research they conducted suggests immigrant families are earning about $15,600 annually and sending an average of $293 back to their native countries each month. Many of the immigrants surveyed lack the identification papers needed to open regular accounts at financial institutions. Immigrants can obtain a Sigo card with only one form of identification.

Hispanics could get hit hard by subprime market foreclosures

A new Center for Responsible Lending (CRL) study reveals that millions of American households will lose their homes and as much as $164 billion due to foreclosures in the subprime mortgage market.

The “Losing Ground” study is the first comprehensive, nationwide review of millions of subprime mortgages originated from 1998 through the third quarter of 2006. CRL finds that despite low interest rates and a favorable economic environment during the past several years, the subprime market has experienced high foreclosure rates, and CRL projects that one out of five (19.4%) subprime loans issued during 2005-2006 will fail.

The report discusses a number of factors that drive subprime foreclosures—these include adjustable rate mortgages with steep built-in rate and payment increases, prepayment penalties, limited income documentation, and no escrow for taxes and insurance. CRL also determines that these features cause a higher risk of default regardless of the borrower’s credit score.

CRL’s study also finds that recent high appreciation in many areas has masked problems in the subprime market, and that the cooling housing market will cause failure rates to rise sharply in many major markets. California, Arizona, Nevada, and greater Washington, D.C. will be especially hard hit. Also in this report, we project lifetime foreclosure rates for 2006-originated subprime loans in each MSA in the U.S.

About 40% of Hispanic borrowers receive subprime loans and their default rate is twice that of whites at 8%, says CRL.

Exploding ARMs pose high risk for debt-strapped families

So-called exploding ARMs use low teaser interests rates to entice debt-strapped families into the loans.

Here’s how they work: Say a borrower with an annual income of $30,353 receives a 2/28 subprime home loan for $180,000. The teaser interest rate is 7.55% and gives the borrower an initial monthly payment of $1,265. Fully indexed, the rate climbs to 11.25% and hikes the payment to $1,726, a 36% increase that occurs usually within two years time. Not many households increase their incomes that fast to make up for the increase in payments.

CRL recommends lenders should qualify borrowers based on the fully indexed rate of the loan (in our example, 11.25%).

According to CRL, as of September 2005, about 80% of subprime home loans were ARMs, mostly 2/28 hybrid loans that operate as two year loans that lead to another ARM that the borrower often cannot afford.

Short Takes…

• Results of CUNA’s 2006 Survey of the Hispanic/Latino market are now available at CUNA’s Hispanic Resource Center…
• California leads the nation in higher-cost, subprime home lending. The number of higher-cost loans in that state more than doubled and the total amount of dollars lent tripled from 2004 to 2005. Higher cost loans are defined as loans carrying an interest rate of at least three percentage points above the prime rate…
• There are 10 states that offer in-state tuition to illegal immigrants under certain guidelines, according to the National Immigration Law Center. At a national higher education conference on college access and affordability at the University of North Carolina, demographer Marta Tienda from Princeton University noted by 2010, more Hispanics will have been born in the U.S. than those that immigrated. They will be American citizens and eligible for aid and in-state tuition…
• CareerBuilder.com says one of 10 employers will be targeting Hispanic job candidates in 2007 and half of the employers recruiting bilingual employees will be seeking Spanish-and- English speaking employees. Other job trends they report, bigger paychecks, 65% of employers say they will raise compensation levels by 3% or more; 20% say they will be rehiring retirees; 10% say they will provide flexible work hours or job sharing; 78% will provide training for staff.
• With more than 219 million people (72% of the U.S. population) already signed up as cell phone users, phone companies now are turning their marketing campaigns toward Hispanics in the U.S. because they use more minutes, tend to have higher data usage than average, and tend to be younger…
• Hispanic women are a rapidly growing part of the U.S. population, with especially large representation in younger age groups. By 2050, Hispanic females are forecasted to comprise nearly one quarter of U.S. women. Their economic power is increasing. From 1979 to 2002, Hispanic women gained a 10% increase in real earnings, increasing median annual earnings from $18,720 to $20,592 …
• Spurred by growing entrepreneurial trends and affluence among the nation’s largest minority population, the increase is expected to come at a robust rate of 7.6 % annually through at least 2010. The number of Hispanic-owned businesses in the U.S. is expected to grow 55% in the next six years to 3.2 million, with total revenues surging 70% to more than $465 billion, according to new estimates by HispanTelligence…
• The National Endowment for Financial Education (NEFE) brought together a wide ranging group of individuals to talk about the financial education challenges of serving the Hispanic market. “Exploring Personal Financial Challenges and Opportunities Facing Latino Immigrants” suggests that financial education is an ongoing process that cannot be bought or sold. There is a huge disconnect between the way financial institutions market their products and the way Hispanics purchase them. And financial institutions are not structured to serve low-income and low-asset people….

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