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CU Snapshot
| 2Q '09 | 1Q '09 | |
| # of CUs | 7,982 | 7,998 |
| Members (millions) | 91.9 | 91.7 |
| Total Assets ($ billions) | 871.8 | 867.4 |
| Total Savings ($ billions) | 741.8 | 737.2 |
| Net Cap. /Assets | 9.6% | 9.6% |
| Loans to Savings | 78.5% | 78.8% |
| Loan Delinq. | 1.60% | 1.54% |
The Hispanic Market
Portions of the market run counter to stereotypes
Jose Santos, who came to Baltimore from Honduras when he was a teenager, doesn't bank anywhere, reports the Baltimore Sun. The 22-year-old undocumented immigrant who works in construction does, however, have financial goals: To wire at least $500 a month to his family in Central America and to perhaps one day buy a home.
Santos, it turns out, may be exactly the kind of customer that a host of financial institutions are clamoring to serve.
Eager to appeal to the fastest-growing demographic group in the nation, financial institutions are making it easier for customers to send money to Latin America. They're also improving customer service by hiring bilingual tellers and financial advisers. They've also stirred up some controversy by offering mortgages to foreign nationals who might not be legal residents and accepting identification from other countries. Although some believe the industry's outreach is long overdue, critics say some institutions are encouraging illegal immigration.
Hispanics, including an estimated 11 million undocumented immigrants, represent a big business opportunity for financial institutions. The market data is compelling—and often counter to stereotypes. About one-third of Hispanic households are squarely in the middle class with annual household incomes of up to $75,000--the same proportion as in the general population--and another one-sixth of Hispanic households could be considered affluent, U.S. Census data shows.
TowerGroup estimates that up to 70% of the growth for the financial services industry could come from the Hispanic market alone in the next several years.
While financial institutions have been vying to attract Hispanic customers for several years, the trend is now expanding outside Hispanic-dominated regions such as Texas and Southern California. Hispanics make up only 2% of the population in the Baltimore area, but their numbers are growing, having topped 50,000 in the 2000 census, up 80% from a decade earlier.
Financial services that are open to undocumented immigrants have drawn some protest across the country from activist groups such as the Minuteman Project--best known for posting private citizens on the U.S.-Mexico border to stop unlawful crossings. Minutemen staged demonstrations this summer at banks in Utah with signs accusing the institutions of "laundering" money for illegal aliens.
But Hispanic customers and advocacy groups have welcomed the initiatives, and federal regulators have promoted them.
The Federal Deposit Insurance Corp. formed a task force in Chicago to help banks tailor services to Mexican immigrants who settled in the Midwest, regardless of their legal status. Banks are required by federal law to meet the credit needs of the communities where they operate. Regulators decided this year to allow banks to get credit under the law for offering remittance services that send money to native countries.
"Banks need to take a look at their communities because there's a changing face out there," said David Barr, an FDIC spokesman. "With Chicago, for instance, everyone thinks of Eastern Europeans, particularly Polish immigrants, but today Chicago has the second-largest Hispanic population in the country."
Hispanic organizations, such as the National Association of Hispanic Real Estate Professionals, say that bringing immigrants into the banking fold cuts down on predatory lending to a vulnerable population and strengthens communities that benefit from higher homeownership rates and from residents building wealth.
Some financial institutions are following a path forged by Wal-Mart, Coca-Cola, and other retailers that began targeting the Hispanic market a decade ago. Hispanic purchasing power grew nearly 250% from 1990 to this year, to $736 billion from $212 billion, according to the Selig Center for Economic Growth at the University of Georgia.
A market to court
"Retailers have known for a long time that this is a market they should court, and the financial sector is really just catching up now," said Frances Martinez Myers, chairwoman of the Hispanic Real Estate Association, based in San Diego.
Martinez Myers said Hispanics are more financially secure than ever, and financial institutions have taken notice as affluent Hispanic households nearly tripled in the 1990s. Institutions are also looking for ways to grow as interest rates continue to rise, squeezing their profit margins, and as the once-booming business of refinancing mortgages has dried up.
Some institutions are offering "ITIN mortgages" to foreign nationals seeking to buy a second home or investment property using an Individual Taxpayer Identification Number instead of a Social Security number.
The Internal Revenue Service has been issuing ITINs since 1996 to workers who are required to pay U.S. taxes but who don't qualify for a Social Security number, or who are in the middle of legalizing their immigration status. Many ITIN holders may not be qualified to work in the U. S., according to the agency. But neither the IRS nor financial institutions have the authority or obligation to check an individual's legal status.
The market for mortgages among illegal immigrants could be more than $40 billion, according to one study that found tens of thousands of undocumented renter households could afford homes worth $200,000 or more. Nationally, the homeownership rate for Hispanics is 49%, compared with 69% for the entire population.
One barrier to Hispanic immigrants obtaining a mortgage has been the lack of a credit history. About 40% of foreign-born Hispanics don't have bank accounts, often using money orders to pay bills, according to the Pew Hispanic Center.
The First American Corp. of Santa Ana, Calif., recently started building alternative credit profiles on potential homebuyers for mortgage lenders with sources not normally considered by the credit bureaus, such as rental histories and payments to rent-to-own establishments. Some lenders also consider an applicant's receipts from remittances.
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