The results of the latest U.S. Census confirmed what many Federal Home Loan Bank of Boston members already knew: Hispanics comprise New England's fastest-growing immigrant group.

In Massachusetts, the Hispanic population grew by almost 50 percent between 1990 and 2000. Meanwhile, New Hampshire and Rhode Island recorded jumps of 80.8 and 98.5 percent, respectively. In terms of financial clout, Hispanics are predicted to account for $452 billion, or six percent, of the country's spending in 2002.

To tap this market, financial institutions need a strong commitment to building relationships, says Jose E. Cabrera, a vice president at Massachusetts member Andover Bank.

Building Trust, Bridging Cultural Gaps
"In my Lawrence portfolio alone, there are 122 borrowers — 99 percent of them Latinos — with 224 loans," says Mr. Cabrera. "It's a small portfolio, but a revolving one. Some customers have come back three or four times to do business with us."

Earning such customer loyalty requires first overcoming the reservations many recent immigrants have about banking institutions.

"In many of their countries of origin, there were banking failures where people lost money left and right," says Mr. Cabrera. "You have to build up their trust, so they know not only is it safe to put $500 in the bank, but that they'll also receive interest on it. This may be second nature to your more established citizens, but, for Latinos and other recent immigrants, it's a matter of getting to know you."

For that reason, good customer service is a must, says Kathleen Tullberg, manager of the Massachusetts Community & Banking Council (MCBC), a collaborative effort between community and banking representatives to encourage investment in low- and moderate-income and minority neighborhoods.

"A bank's representatives need to understand where their customers are coming from, if they are to best serve them," notes Ms. Tullberg. To foster such understanding, institutions can offer staff training to increase awareness of cultural differences and issues.

In addition, "It is critical that you keep your staff informed, so they can be of real assistance," says Ms. Tullberg.

Tellers and customer service representatives — the first people customers will encounter at a branch — should know of any special first-time home-buyer programs that their institution offers. Financial institutions should also educate their staff about local organizations that offer such programs, so staff can refer customers.

Providing Critical Information
As for all first-time buyers, ensuring successful Latino mortgage applicants starts with making sure that they have all the information they need about what goes into buying a home. To be effective, banks need to be sensitive to the needs, concerns, and perceptions of newcomer communities.

In recent years, the MCBC's Mortgage Lending Committee Task Force on Latino Mortgage Lending has been working to ensure that Latinos have the same mortgage opportunities as other home buyers.

"In our focus groups, we found that there was some sensitivity about whether or not [Latinos] were being treated like everyone else," says Ms. Tullberg. "For example, many applicants didn't understand why they were being asked for the same kinds of information over and over again. It seemed intimidating."

Financial institutions can prepare Latinos to successfully apply for a mortgage by providing a checklist of the required documentation, as well as materials outlining credit issues and the steps in the home-buying process.

Massachusetts member Eastern Bank, a mutual bank headquartered in Lynn, offers prospective buyers a variety of Spanish materials, says Cynthia C. Merkle, senior vice president/ mortgage banking. Among these are brochures that outline the home-buying process (produced by the Massachusetts Bankers Association in Spanish and seven other foreign languages) and mortgage applications and disclosures in Spanish (produced by Fannie Mae). An English-to-Spanish translation of the member's mortgage Web page is in development.

Financial institutions can also steer customers to workshops that prepare them for the home-buying process. For example, Eastern Bank has worked with the Lynn Housing Authority to develop a first-time home-buyer curriculum, which is offered in Spanish.

Ms. Tullberg points out that each institution should tailor its services to fit the needs of its customers. "Much depends on where an institution is located and what its capacity is," she says. "Clearly, a bank located in an area with a significant Latino population will need to recruit individuals who can speak Spanish or to encourage staff to learn."

In Lynn, Latinos will soon account for 50 percent of public-school students. The city is also home to many immigrants from Southeast Asia and, more recently, Russia.

To ensure assistance for everyone who comes into one of its four downtown branches, Eastern Bank lists the names and phone numbers of all employees with special language capabilities in a special section of its internal phone directory. "For example, a staff member who doesn't speak Spanish or Russian can call a person at another branch who can help the customer," says Ms. Merkle.

Partnering with Nonprofit Organizations
Banks should also consider enhancing their links to local housing groups and other community-based organizations. Community groups are often in a better position to provide education and outreach because of their close ties to target communities.

"Initially, we offered first-time home-buyer and other programs on our own," says Mr. Cabrera. "However, our classes — which were usually held during the day — were not convenient for participants. We found ourselves competing with community groups that often did a better job with the programs."

Today, Andover Bank partners with the Merrimack Valley Housing Partnership to educate potential customers. The member also provides down-payment assistance through community-development corporations participating in the Massachusetts Housing Finance Agency's first-time home-buyer program.

Similarly, Eastern Bank has developed strong alliances and business relationships with many of Lynn's nonprofit organizations. "We bank the city, the Lynn Community Health Center, social services, and the Community Minority Cultural Center," says Stanley J. Lukowski, the member's chairman and chief executive officer.

The Eastern Bank Charitable Foundation, which is funded by 10 percent of the member's annual profits, further strengthens these ties. Every year, the foundation donates five percent of its assets through grants to Greater Boston nonprofit organizations.

Demonstrating Flexibility
Providing newcomers with loans may require a bank to adopt more flexible underwriting criteria. Like all first-time home buyers, Latinos may not understand the importance of a good credit history or know how they can build, maintain, or repair it. "We help people start savings accounts and learn the value of methodically putting money into their accounts," says Ms. Merkle.

"We also work with customers to build or rebuild their credit," she continues. "Helping this process is the fact that, in recent years, the national investors have relaxed their underwriting guidelines." Now, the member can consider a history of paying rent or utilities as nontraditional verification for those with little or no formal credit history.

Andover Bank takes a similar approach. "Customers with less than perfect credit ratings are common in our portfolio," says Mr. Cabrera. "However, strong cash flows compensate for this risk and limit our exposure."

Tapping the Federal Home Loan Bank of Boston
James C. Real, the Bank's first vice president / sales and business development, says that serving emerging markets, such as Latinos and other recent immigrants, is key to community banks' ultimate success.

"We're committed to helping members learn who these growing markets are and how best to serve them," he adds.

Members can use the Bank's Affordable Housing Program and Community Development advances to forge relationships with local housing and community-development organizations.

"Our grants, rate-subsidized advances, and discounted advances can support first-time home-buyer programs and other initiatives in ways that otherwise would not be financially feasible," says Carmen Gutierrez-Seales, a community investment manager at the Bank who's also active in several professional Latino organizations. "Members should look to these programs as they develop new and creative ways to assist the Latino population."

According to Richard J. Rehal, vice president and regional manager of retail banking at Eastern Bank, the development of such strategies is a natural extension of any community bank's business activities.

"Such efforts are simply a part of our culture," says Mr. Rehal. "At Eastern Bank, we have always evolved to meet Lynn's changing needs. Becoming part of a community comes from living and working there — it's not something you can do by remote control."

This article was written for the Bank's Tools for Housing and Community Economic Development newletter (issue 17, Winter 2002).