The Latino population, and in particular Latino immigrants, has become a central part of the economic, social, and political life of the United States.1 In 2005 Hispanic households represented 11 percent of total households in the United States, with an actual number of approximately 11.7 million. Immigrants represent a large portion of this population, with 53 percent (6.2 million) of Hispanic households being headed by individuals not born in this country.
The growth of the Latino population, both native born and immigrants, has had a significant impact on the US housing market in the last few years, so much so that Latinos and immigrants represent a unique opportunity for growth in a market facing a slump. Between 1995 and 2005 the number of Hispanic owner-occupied homes increased by 3.1 million, a growth of 81 percent in a decade (Ready 2006, 9). Even with this striking progress, Latinos still lag behind the national levels of homeownership. In 2005, of the total 11.7 million Hispanic households, only 48 percent owned their own homes. Homeownership levels for the general population were 67 percent in the same year.
A more in-depth look at the Latino community shows that immigrants are particularly inderrepresented among homeowners. US-born Latinos present a level of ownership of 56.1 percent, while immigrants only reach 44.9 percent.4 More than half (53 percent) of Hispanic households in the United States are headed by immigrants, a majority of whom have yet to reach the homeownership dream.
Within the immigrant population there are also variations in homeownership levels by legal status, with only 34 percent of noncitizen Hispanic householders being homeowners. In contrast, 63.5 percent of naturalized Hispanic citizens are homeowners. The significantly higher rate of homeownership among naturalized citizens is offset by the fact that only 37 percent of Hispanic immigrants have become citizens.
Undocumented workers represent a significant segment of the noncitizen Latino population. Using the 2005 Current Population Survey, the Pew Hispanic Center (2006) calculated that there were between 10.7 and 11.5 million unauthorized immigrants in the United States. Using 2004 data, the Center estimates that 57 percent of undocumented immigrants are Mexican, with an additional 24 percent coming from other Latin American countries (Passel 2005). In addition to harsh economic conditions and the constant risk of deportation, the lack of proper visa documentation and valid identification poses another challenge for those undocumented immigrants looking to own a home.
The data show that there is still a long way to go in the promotion of homeownership among Hispanics in general and Hispanic immigrants in particular. For any potential homeowner, and immigrants are no exception, perhaps the most important factor in achieving homeownership is the availability and affordability of mortgages. Homeownership is almost impossible without access to adequate and affordable financial services. Hispanic immigrants, many of whom belong to the ranks of low-and medium-income households, face several obstacles to accessing credit. Besides the already mentioned lack of identification for undocumented immigrants, other factors affecting access to mortgage loans among Hispanic immigrants include a low or no credit score, the language barrier, lack of down payments, and expensive housing markets.
Fortunately for Hispanic immigrants, financial institutions and government agencies have created innovative lending products and programs designed to fulfill their needs. In addition, ontraditional lending products like subprime lending, adjustable-rate mortgages (ARMs), and alternative documentation (Alt-A) loans, although not specifically designed to provide Hispanic immigrants access to credit, have nevertheless offered them new homeownership opportunities.
The present report will concentrate on describing how the innovative products available to Latino immigrants have helped or will help them to overcome challenges unique to this population and how immigrants can tap nontraditional mortgage products to become homeowners. However, opportunities do not come without a risk. The penultimate section will analyze the risks and costs associated with these new opportunities, in particular the risks of foreclosure and predatory lending.
