Angelica Higuera, 33, is a public school teacher who, on weekends, cleaned houses and scrubbed toilets to earn extra money.

Jose Higuera, 35, is a scrap metal hauler who worked 14-hour days so he could eventually buy six trucks.

That’s how the Higuera family finally landed their dream home: a two-story dwelling surrounded by rose bushes on a Yorba Linda cul-de-sac that cost $785,000.

“Our motto is, ‘It’s not where you’re at… ” said Angelica, as their two children, 6-year-old Jay and 4-year-old Kassandra, played tag in the spacious backyard. “… It’s where you’re going to be.’”

Real estate professionals call them “Hispennials.” The label, a mash-up of Hispanics and millennials, defines a group of consumers, aged 20 to 36, which the housing industry is eagerly courting.

“If you look at the Latino population, their demographic is younger and they are just starting to buy homes,” said Rick Arvielo, CEO of Tustin-based New American Funding, a fast-growing lender with 35 offices in Southern California.

“Millennials and Hispennials are the biggest waves in home buying.”

Today, just 45 percent of Latinos in the U.S. own homes, 20 percentage points lower than the home ownership rate of non-Hispanic whites.

But that’s changing quickly. Last year, Latinos accounted for 75 percent of the net growth in overall home ownership. Their numbers grew by 209,000 to a total of 7.3 million, according to the National Association of Hispanic Real Estate Professionals.

“The Hispanic market has outgrown the ‘niche’ segment designation,” the San Diego-based trade group asserted in its annual report.

And a study by the Housing Policy Finance Center of the Urban Institute, a Washington, D.C.-based think tank, makes this prediction: By 2030, Latino families will comprise 56 percent of all new homeowners.

California’s Latino surge

For Hispennials, who generally have lower credit scores than non-Hispanic whites, and less help from prosperous relatives for down payments, buying a home is far from easy. And the Urban Institute warns that for the overall housing market to remain prosperous, Latinos must gain more access to credit.

“The face of the nation is changing, and our housing market will inevitably change with it,” they wrote.

“It will either do so by contracting, because it cannot accommodate a larger and larger percentage of our citizens, or it will do so by becoming more inclusive because we have found ways to bring a more diverse profile of borrower into the system.”

Big banks are stepping up.

In 2015, Wells Fargo, the nation’s largest mortgage originator, pledged to lend $125 billion to Latinos over 10 years and grow the number of Hispanics on its sales teams. Last year, the bank loaned $10.5 billion to 44,000 Latino families—9 percent of its total purchase mortgages.

“We made this commitment because Hispanics are the largest growing demographic of homebuyers in the next decade,” a bank spokeswoman said in an email.

The move is also good public relations: In 2012, Wells Fargo paid a $175 million settlement to resolve federal charges that it had assessed 34,000 Hispanic and African-Americans higher mortgage fees and rates compared with white borrowers with similar credit profiles.

Hispanics make up 18 percent of the U.S. population, but they accounted for about half the country’s overall growth since 2010. One in five of the nation’s 75 million Millennials identifies as Latino.

In California, Latinos are now the largest ethnic group. They make up 38.8 percent of the state’s 39 million residents, having edged past the portion of non-Hispanic whites two years ago.

Rebounding from foreclosure

The Higueras bought their first home in 2006, in Perris, for $360,000. They saved for the three percent down payment by living with their parents after college.

“At Fullerton College, my economics professor told us, ‘Whatever you do, buy a house as soon as you have a full-time job,’” said Angelica, who was born in Orange and raised in Anaheim. “It is an investment.”

But home ownership and a strong work ethic also ran in the Higueras’ families.

Angelica’s parents, Mexican immigrants, work in Anaheim factories, her mother on an assembly line at a nutrition plant, and her father as a supervisor at an electronics manufacturer. Over the years, they saved up enough to buy a home and two rental properties.

Jose’s parents, also Mexican immigrants, pooled their incomes and his siblings’ earnings to buy a home in Anaheim. His mother washed dishes at a retirement home and his father worked as a mechanic at a junk yard and as a big rig driver.

In 2009, however, the recession tanked Jose’s scrap hauling business. The Higueras went bankrupt and lost their Perris home to foreclosure.

They moved back to Anaheim, living in one of Angelica’s parents’ rental homes. Slowly, they built back.

“I worked three jobs and we counted every penny,” Angelica recalled. “It took three years to pay off our debts.”

In 2012, as Jose’s business rebounded, they bought a modest Anaheim house out of foreclosure for $290,000. Thanks to Orange County’s hot housing market, they sold it last year for $510,000, and used the equity from that sale as down payment for the Yorba Linda home.

By then, Angelica was making $75,000 a year as a special education teacher in the Moreno Valley Unified School District. Jose was netting about $100,000 a year from the hauling business.

“We see every downfall as an opportunity to become better,” said Angelica, who also handles finances for the hauling business.

“The recession was a blessing in disguise,” she added. “We got to move back to Orange County, near our friends and families.”

A Tustin lender to the underserved

With the median age of Latinos at 28, compared with 43 for non-Hispanic whites, more families like the Higueras are moving into the housing market. And Latino-focused lenders are ready to help.

In the past five years, New American Funding, which holds the Higueras’ mortgage, has become the largest independent purchase lender in Southern California, as distinguished from national banks such as Wells Fargo and Bank of America.

About a quarter of the firm’s $22 billion portfolio is loaned to Latinos. With 130 branches nationwide, New American’s loan volume boomed to $11.7 billion last year from $3.6 billion in 2012.

Arvielo, the CEO, is of Italian-American extraction and his wife, Patty, a longtime mortgage professional who is president of the company, is the daughter of a Mexican immigrant mother and an American-born father.

“Patty is passionate about lending to the underserved,” Rick Arvielo said. “These days, anybody who doesn’t have a super-high credit score and super-high income is underserved. A large percentage is people of color.”

Patty Arvielo headlines the company’s conferences for real estate agents across the country entitled “The Hispennial Generation: Marketing to the Nuevo Latino.”

Twenty-eight percent of New American’s 2600 employees are Latino. The firm has committed to recruiting, training and hiring another 1,000 Hispanics by 2024.

By 2024, New American has pledged to grant $25 billion in new mortgages to Latino borrowers. The company also has launched an initiative to boost lending to African-Americans.

“It is the smart thing to do,” said Rick Arvielo. “We are a nation of minorities. If you are not going to be inclusive of them, you are thinning your opportunities.”

Mattress money

Along with Alterra Home Loans in Las Vegas, another Latino-focused lender, New American is tapping into programs offered by federal mortgage backers Fannie Mae and Freddie Mac designed to help families who don’t meet traditional lending criteria.

Fannie Mae’s “HomeReady” and Freddie Mac’s “Your Path” allow the income of extended family members in multi-generational households to factor into eligibility, even if they aren’t listed on the mortgage. They allow money from seasonal work, or self-employment to count toward the borrower’s income.

Alterra, which has 62 branches nationwide, including 21 in Southern California, loaned $1.3 billion last year, up from $948 million in 2015. Latinos accounted for 60 percent of that business.

“The only market segment that is increasing its homeownership on a yearly basis is Hispanics,” said Chief Production Officer Miguel Narvaez. “For first-time buyers, Hispennials represent the future.”

Understanding the cultural nuances of Latino families is key.

“When you are dealing with Jose and Maria who work more than one job, some of their income may be in cash, “Rick Arvielo said. “They don’t trust a bank so they may not deposit their money. They may have mattress money.”

A 2015 study by the Federal Deposit Insurance Corporation, a federal agency, estimated that 16 percent of Hispanics is unbanked, as compared to 7 percent of the general population.

Another issue is credit scoring.

“One thing that disqualifies borrowers is too many open trade lines,” Arvielo added. “Say they have a Sears card, a Nordstrom card and seven MasterCards. That’s because Hispanics go to Toys R Us to buy a stroller and the store offers a discount if you get their credit card. They may never use the card again.”

The automated program most lenders use to measure and quantify their risk in any home loan transaction, Desktop Underwriter, “doesn’t understand the story,” Arvielo said. “But we will approve the loan in a manual underwrite.

“You need a human who understands cultural differences,” he added.

Tight credit for Latinos

Unlike most lenders who rely on outside servicers to collect payments, the Arvielos set up an in-house entity in Austin, Texas to service the firm’s $22 billion portfolio.

“Hispanic couples sometimes need more handholding,” he said. “We built Spanish-speaking teams to serve our borrowers.”

Arvielo acknowledges the excesses of the 2007-2010 mortgage crisis, when some lenders widely ignored traditional rules — or even committed fraud — to make profit on loans that weren’t financially sound. “Subprime is a dirty word in our industry now,” he said.

“Where the wheels came off is when you had a maid who wanted to buy a half-million dollar house. An irresponsible lender would write down income of $20,000 a month because that’s what she needed to qualify.”

But the tightening of credit since the housing meltdown has meant that many credit-worthy borrowers are “effectively being shut out from homeownership,” NAHREP, the trade group for Hispanic realtors, noted in its report.

The effect on Latinos is acute: in 2016, they were denied conventional loans at a rate of 17.3 percent, nearly 9 percentage points higher than the denial rate for non-Hispanic whites.

Lenders today shy away from borrowers with credit scores below 640, Arvielo said.

New American will go lower “under certain circumstances, but there’s got to be a story,” he added. “Our goal isn’t to give a bunch of loans to people who are going to struggle to repay. Our goal is to get people into housing.”

He added, “The hardest working people in the world are people of color. But they don’t have the opportunities that Joe White does. That’s one reason our middle class is shrinking. Housing is America’s number one wealth builder.”

And building wealth is what the Higueras and fellow Hispennials are eager to do.

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