A credit union’s income is largely driven by its loan portfolio, and there is a unique opportunity for even greater loan growth available to institutions willing to go the extra mile in serving immigrant populations.
Not everyone who works in the U.S. is considered a citizen, yet all are required to pay taxes on their earnings. Workers who don’t qualify for Social Security numbers must satisfy their debt to the IRS by registering for Individual Tax Identification Numbers, better known as ITINs.
More credit unions are starting to use ITINs to qualify borrowers for loans and other services, a move beneficial both to members and their institutions.
This is especially true for credit unions serving Hispanic and other underserved markets, but it should be noted that ITINs are not only for Hispanics and recent immigrants. Many workers from Canada, India and other countries pay their U.S. taxes through their ITIN accounts. Done correctly, loans using ITINs as proof of income can open a new world of borrowers for participating institutions.
This past month Coopera, in partnership with our sister company PolicyWorks, the Filene Research Institute and inclusiv (formerly the National Federation of Community Development Credit Unions) released the Implementation Guide: Individual Taxpayer Identification Number (ITIN) Lending. The 67-page publication, free to credit unions, offers a comprehensive, legally compliant approach to ITIN lending.
The guide consolidates best practices, tools and resources for credit unions wanting to reach this largely untapped market of immigrant workers who need the ability to more fully participate in the economic growth and development necessary to make their lives financially secure.
The guide evolved using testing results from the Filene Institute’s Reaching Minority Households Incubator, which measures products and service strategies for reaching financially underserved consumers. Coopera was a major collaborator in both the research study and implementation guide creation.
This guide couldn’t have come at a better time. There is a very strong business case for providing personal and automobile loans to what is an often-overlooked population segment. As with other financial products provided to the Hispanic community, the word is likely to spread among its members, resulting in an increase in member applications along with the resulting loan growth.
There also is an equally strong philosophical platform for ITIN lending. Providing members of this group greater financial stability and more active participation in the U.S. economy serves not only their needs but helps create a level of increased financial security that serves to further strengthen their community and society at large.
Credit unions are committed to serving the underserved, and this may well be the most underserved community of all.
Please feel free to contact any of us at Coopera for more information on ITIN lending and a copy of the guide. We are here to help.Leave a comment
When I accepted the position of CEO of Coopera earlier this month, my team gave me a framed quote that, in terms of the organization’s mission and my own personal career trajectory, couldn’t have been more profound.
The quote reads, “Hispanics need credit unions as much as credit unions need Hispanics.” It is attributed to Warren Morrow, the founder of Coopera.
To say that I was as moved by the gift as I was by the sentiments it expressed would be a significant understatement. In a mere 11 words, Warren’s statement outlined the future of both the credit union movement and that of Hispanics seeking to economically thrive in the United States. It also provides all of us with guidance in helping both communities cooperatively move forward in the new millennium.
Warren was born in Mexico City to an Anglo father and a Mexican mother, moving to Tucson, Arizona, while still in grade school. The need to assimilate helped define Warren’s character, but he never forgot nor abandoned his Hispanic roots. Providing higher education opportunities and helping create financial stability for Hispanic families became the mission and the passion of his too-short life.
Warren died unexpectedly in 2012 at age 34. Both Miriam De Dios Woodward, my predecessor at Coopera, and I had worked with Warren and are committed to following his guidance.
Warren realized early that credit unions’ cooperative nature aligned with the different Hispanic cultures. As the number of U.S. credit unions continues to decline and more nontraditional vendors fight for our financial business, it’s not unrealistic to believe that Hispanic communities may be the best and most likely hope for the future of the credit union movement.
Think for a moment about the parallels between the two entities. Despite their differences, the social cultures of various Hispanic countries are built on the strong foundation of family and community. Nothing is more important, and nothing else gives both the various cultures and their people their solidarity and strength.
It’s also fair to say that of all financial institutions, credit unions come the closest to establishing “communities” among their members. Their emphasis on member service helps foster the financial growth among those communities, much like Hispanic communities and families foster the social and emotional growth among their members.
Coopera exists to create a link between credit unions and the Hispanic communities they seek to serve. Through analytical study we can define exactly which Hispanic cultures predominate in each city, town or rural area. Our emphasis on digital and remote services can help credit unions reach those groups economically and address their needs in ways in which members themselves prefer to be served.
Hispanic members are like anyone else in terms of the products and services they need and want to survive and thrive in today’s economic environment. The difference is that, unlike other member groups, Hispanics put greater faith and trust in their communities, and credit unions that align with those communities will see greater loyalty and higher levels of service usage among those community members.
Warren Morrow knew that. Through Coopera and previous enterprises that he managed, Warren sought to strengthen the bond between Hispanics and credit unions through considerable effort and, probably, no small amount of prayer. His efforts and their effect are to be lauded.
Warren’s message still lies at the heart of Coopera’s primary mission, and it’s a promise we plan to keep to both credit unions and the Hispanic communities they seek to serve.Leave a comment
It was barely 10 months ago that I joined Coopera as client relations director, having just spent 20 years working with the global credit union movement as part of World Council of Credit Union’s executive staff. Today, I begin my tenure as Coopera’s CEO.
I’m still reeling at the tremendous opportunity I have been given. I’m thrilled to be leading the only organization devoted to helping improve financial services delivery through credit unions for U.S. Hispanic population members nationwide. What an honor!
I am thankful for the remarkable work former CEO Miriam De Dios Woodward has done building this organization. I’m pleased she has taken over the role of CEO of PolicyWorks LLC, Coopera’s sister organization that provides compliance solutions to more than 1,200 credit unions across the country.
As CEO, I plan to carry on the work Miriam started to increase services to a growing number of credit unions and other organizations seeking to effectively serve Hispanic communities and individuals. The market has never been larger, and the need for those services never greater.
Many people don’t realize that there are currently about 55 million Hispanics living in the United States. That makes the U.S. the world’s second-largest Spanish-speaking country after Mexico.
Hispanics also are the largest ethnic minority in the United States, and one that credit unions can most effectively serve through their cooperative structure and wide array of financial products and services.
As a native of Panama and first-generation immigrant, I have lived the American immigrant journey. I had the good fortune to come to the U.S. as a teenager on a Fulbright scholarship to pursue degrees in economics and Latin American studies at the University of Wisconsin-Eau Claire and I have been here ever since. I also have devoted my professional life to credit unions and have long promoted their ability to serve the Hispanic population.
The key factor many credit unions forget, however, is that an effective service profile is at no time found in a one-size-fits-all strategy.
Spanish may be our shared language, but each of us comes from a different culture. The culture in the Dominican Republic is different from that of Colombia, and Mexico is not the same as Cuba. Credit unions must first recognize the origins of their Hispanic members, then find ways to connect with their communities in order to gain the trust necessary to create a trust relationship with those members.
Helping credit unions do just that through analytical tools and strategic planning is part and parcel of Coopera’s mission. Credit unions that understand their current and potential Hispanic membership base can better develop the proper strategic approach to serve those members. Supporting that understanding lies at the core of Coopera’s services.
Given the current politics of immigration, the parameters for serving Hispanic members may seem very different from serving other member groups. Credit unions must be prepared to accept different forms of identification, for example, and be willing to partner with different community organizations to make sure Hispanics receive the financial and social support they need.
For credit unions, it becomes a case of self-examination. Does the credit union truly represent the field of membership that it’s serving? Are there Spanish-speaking employees, executives and maybe even board members who represent what has the potential to become a key constituency?”
For credit unions, effectively serving Hispanic members is much more than a case of just doing the right thing socially and politically. In a marketplace where competition increases while service opportunities decrease, building a strong Hispanic base can be the key to stability, relevancy and increased growth.
Credit unions with significant Hispanic membership often see both loan and deposit growth at rates higher than industry norms, while the average member age has decreased by about 10 years. There is a positive business case for serving the Hispanic market, one that shows the market’s relevancy and sustainability over the long run.
In the end, Coopera’s goal is to help credit unions succeed by understanding and creating empathy for people on the immigrant journey, much like the one I took.
Our industry really can’t ignore a group that in just a couple of decades will comprise one-third of the U.S. population. At Coopera, we’d like to help more credit unions meet their own goals, and successfully serving Hispanic members is an important part of that equation.
Speaking on behalf of Coopera’s excellent staff and myself, we’re all ready to work with partners both veteran and new in embracing a new era of success in serving Hispanic members nationwide.Leave a comment
Hispanics are more optimistic about their financial futures than other consumers segments. As multicultural marketing expert Isaac Mizrahi shares in Forbes, in the next 12 months…
• 9 percent of Hispanics are planning to buy a house, compared to 6 percent of non-Hispanics. This means Hispanics, who represent about 18 percent of the U.S. population, may represent 22 percent of all new home buyers in the next year.
More than 3 percent of Hispanics plan to make their first financial investment ever, compared to 1.5 percent of non-Hispanics. Hispanics may represent almost a third of all new investors in the market in the next 12 months.
Not only do Hispanics tend to be more optimistic about finances than other consumer segments, but their optimism appears to be growing. In an April 2018 poll conducted by the Florida Atlantic University Business and Economics Polling Initiative, 69 percent of Hispanics indicated they are financially better off today than a year ago, up 4 points from the previous quarter.
In addition, 78 percent of Hispanics are optimistic about their financial future, up 7 points from the previous quarter. Finally, 69 percent of Hispanics think it is a good time to purchase big-ticket items for their homes, up 17 points from the last quarter of 2017.
What’s driving the increased optimism?
Another important factor is the number of Millennials who make up the Hispanic population. Pew Research Center has found 90 percent of Hispanics below the age of 30 report they expect their finances to get better in the next year, compared to 81 percent of the Hispanic population overall.
This is important because Millennials make up about 40 percent of the U.S. Hispanic population – about twice the proportion that Millennials make up in the overall U.S. population.
What does Hispanic optimism mean for credit unions?
This is all good news for growth-minded credit unions desiring to serve Hispanics in their community. With increased optimism generally comes an increased need for the types of financial services credit unions are uniquely positioned to provide. Below are three areas you may want to review in response to these findings.
Home mortgages and vehicle loans. Evaluate your loan programs to ensure they are relevant and meaningful to Hispanic consumers. Hispanics are declined for conventional home loans at a rate that’s seven percentage points higher than the national average, according to the 2016 State of Hispanic Homeownership Report. Do your programs offer low down payment options and flexibility in determining qualifying income? By expanding your data sources beyond income and credit scores to evaluate a consumer’s ability-to-repay, you may be able to qualify more good borrowers.
Savings and investments. With more Hispanics interested in saving and investing their money, it’s a great time to offer culturally relevant education and programs to encourage these important habits. The need is there. According to a 2014 Prudential Research study, 19 percent of Hispanics had individual retirement accounts, compared to 39 percent of the general population. Only 6 percent had investments in individual stocks, bonds and mutual funds, compared to 18 percent of the general population. And 62 percent of Hispanics had a savings account, compared to 81 percent of the general population. Consider how you might grow that number among your Hispanic membership. More savings means a better bottom line for your credit union, allowing you to originate more loans and help more consumers. It’s a true win-win.
Millennial outreach. The younger consumers learn the importance of building credit, saving and investing, the more prepared they will be for the future. Because Millennial Hispanics tend to be even more financially optimistic than older generations, it’s important that credit unions seek to establish a lifelong relationship with them when they’re young.
Best of all, the more credit unions do to help Hispanics in their communities, the more financially optimistic they will become. And that’s good news for credit unions and Hispanic consumers alike.Leave a comment
In our last blog post, we shared several stats that reveal how Hispanics in the U.S. are driving America’s economic growth. A recent study by Stanford, Harvard and Census Bureau researchers further confirms this point and signals additional opportunities for credit unions.
The study shows Hispanics are escaping poverty and climbing the economic ladder at nearly the same pace as their white peers.
• Among Hispanics in the U.S. who grew up in the lowest income segment, 45 percent made it to the middle class or even higher, compared to 46 percent of whites.
• Of those who grew up in the lower middle class segment, 28 percent made it to the upper middle class or higher, compared to 35 percent of whites.
• Nearly half of Hispanic high school graduates, ages 18 to 24, were in college in 2016, up from just under a third in 1999.
THE CREDIT UNION OPPORTUNITY
Consider how you can help more Hispanic members become homeowners. As Hispanic income grows, so will the ability to buy homes and make other financial investments. In 2017, more than 167,000 Hispanics purchased a first home, taking the total number of Hispanic homeowners to nearly 7.5 million (46.2 percent of Hispanic households). Hispanics are the only demographic to have increased their rate of homeownership for the last three consecutive years. By offering a variety of home loan options supported by culturally relevant education, credit unions can help more Hispanics realize the dream of homeownership.
Offer programs to help Hispanic members save for retirement. A recent survey found 71 percent of middle-income Hispanics feel they are behind on preparing for retirement, compared to 63 percent of the general population. At the same time, many have difficulty securing the financial services that can help them address these issues. The survey found 59 percent are unsure who to go to for financial advice and guidance; 53 percent say it’s difficult to find financial services companies that know how to help households like the ones they belong to; and 42 percent believe they have different financial planning needs than the average household. Fortunately, increasing income mobility will allow Hispanics to start saving for retirement sooner. Consider how your credit union can be the financial services provider many Hispanics are looking for to help with their retirement savings needs.
Partner with high schools and colleges to offer financial education to students. While more Hispanics are attending college, their graduation rates tend to be lower than their white peers. A report by the National Student Clearinghouse Research Center found that 45.8 percent of Hispanic students who entered college in 2010 completed their degree within six years, compared to 62 percent of whites. This disparity could be the result of several different factors, including financial challenges. By offering culturally relevant financial education on topics like budgeting and student loans – as well as encouraging students to establish a relationship with a credit union before or during their college years – you can help more Hispanic students graduate from college and land higher paying jobs.
While the numbers on Hispanic income mobility are encouraging, there is still work to be done. Who better to do it than credit unions?Leave a comment