Mortgage Venture Targets Latinos
Countrywide Financial Corp. announced a venture Thursday to expand mortgage lending to the Southland’s Latinos, amid criticism that it and other lenders aren’t adequately serving that fast-growing community.
The Calabasas-based company, the nation’s largest mortgage lender, said it would provide home loans through a bank owned by TELACU, a nonprofit economic development corporation based in East Los Angeles.
“Our alliances have one goal in mind: to create additional avenues to bring much-needed home loan resources to all of our local communities,” Countrywide Chief Executive Angelo Mozilo said.
David Lizarraga, chief executive of TELACU, said owning a home and building equity were “the first critical steps in creating financial security.” The new mortgage program “is designed to play an important role in providing these opportunities” to the Latino community, he said.
As growth in home sales and refinancings among white borrowers is expected to slow, large players like Countrywide are seeking to expand market share and loan volume in so-called emerging markets -- immigrants and minority borrowers who often have a harder time qualifying for mortgages.
Countrywide says it is the largest mortgage lender to minorities nationwide. In California, the company also ranked as the top lender to Latinos, with about 22% of its loans made to them, a recent study by the nonprofit Greenlining Institute said.
Yet Countrywide and many of its mainstream competitors have been accused of poorly serving minority communities. As a result, minorities have become easier prey for unscrupulous lenders who steer borrowers into mortgages with high interest rates and exorbitant fees, many consumer advocates say.
A study released Wednesday by the National Council of La Raza, a Washington-based organization that tracks Latino issues, found that high-cost mortgages accounted for more than 40% of Latino mortgages in 2002, compared with 18% for whites.
Pairing with TELACU is one way for Countrywide “to tap the Latino market,” said Janis Bowdler, La Raza’s housing policy analyst who reported the group’s finding. “We don’t want it to stop there.” Countrywide, she said, “should take the things it learns from the relationship and apply them more broadly.”
Countrywide also is a partner with La Raza in a service that offers financial counseling to prospective buyers.
The mortgage industry lately has come under scrutiny over data that it is required to file with the U.S. government. Those data, some critics suggest, show that minorities are paying more for conventional home loans and refinancings than whites.
The industry contends the information is incomplete because it doesn’t assess individuals’ credit risks. Still, some community groups have seized on the numbers as evidence that lenders are discriminating against minority borrowers.
In its venture with TELACU -- which was founded in 1968 under the name the East Los Angeles Community Union -- Countrywide will be making loans through the group’s for-profit Community Commerce Bank, which has eight branches in California and about $250 million in assets.
Largely a lender to small-business owners, the bank will create a mortgage arm.
Among the types of loans available is one that uses “flexible” underwriting guidelines. That will help prospective borrowers who may be creditworthy but have nontraditional credit histories or income sources and little money for a down payment. The loan requires putting down 1% of the home’s sale price, or $500, whichever is smaller.
The partnership makes sense, said Kevin Stein of the California Reinvestment Committee, which has been critical of Countrywide’s minority-lending rates.
“It’s hard to argue against what they’re proposing to do, except to say that if you want to reach underserved borrowers you don’t need a Community Commerce Bank to do that.”
