A mortgage for immigrants with money but no credit history
Bank of the West's International Banking Group is using alternative data and the international expertise of its parent company to tap into the lucrative but difficult to underwrite market of middle- and upper-class immigrant mortgage borrowers.
Homeownership rates among recently arrived immigrants are paltry. Quite a few come to this country with a well-paying job in hand and the financial means to afford a home but are not served by existing loan programs because they don't have a U.S credit history. So Bank of the West's International Banking Group developed a targeted mortgage product for these consumers.
To underwrite the mortgages, the San Francisco-based bank uses materials from foreign governments as well as overseas financial institutions to gain insight into applicants' income, tax, assets and employment history.
"We employ translation services when necessary to evaluate those documents. The assets themselves must be in a U.S. bank at the time of the loan transaction," said Joel Eckhause, head of residential lending product and strategy at Bank of the West.
Without this program, recent immigrants either had to wait at least two years to purchase a home as they built a credit history, or they had to pay cash, said Eckhause.
Bank of the West is offering two product types through the program: a 30-year fixed-rate mortgage and a 5/1 adjustable-rate mortgage.
For loan amounts up to $424,100 there is a 70% loan-to-value ratio. Between $424,101 and $1 million, the LTV is 65% and between $1 million and $2 million, it is 60%. The bank portfolios all of these loans.
Even though the Bank of the West program is being marketed by the international group, its retail mortgage loan officers handle the origination process.
The bank did not provide specific origination volume targets for this program. "Bank of the West wants, and has the ability to become, the primary bank for those who need the financial support of a global partner. The success will be measured on how many new relationships are established," said Thierry Gabadou, a Bank of the West vice president and head of the International Banking Group.
Bank of the West has been a wholly owned subsidiary of the French bank BNP Paribas since 2001. BNP Paribas operates in more than 70 countries. The International Banking Group is staffed by people who immigrated to this country and have worked through many of these issues themselves. The mortgage offering joins a credit card product it has marketed to recent immigrants since April 2013.
"It's all based on what can we do to help all those people coming to this country and them knowing that me and my team have gone through the same motions that everybody is going through right now when they arrive here," Gabadou said.
"Every year there are millions of people that come to this country and have a common denominator; they don't have any credit history in the U.S., when they may have immaculate credit overseas," Gabadou said.
Gabadou came to the U.S. 17 years ago from France and started the international group at Bank of the West six years ago, using his own experience as an immigrant as the backdrop.
"You just arrived now," he said. "What is going to happen is that you're going to have a suite of needs that are going to come up very quickly, such as 'I need to open an account; I need to get a credit card and I don't have any credit history. Then I need to find a place to live. Should I rent or should I buy?' "
The loans are being offered in the 19 states where San Francisco-based Bank of the West has retail bank branches. In this footprint, many potential clients (but not all) work in the high-paying technology or biosciences fields.
Real estate brokers in the bank's operating area like this product because of the large quantity of international clients they work with, Eckhause said.
There is a low homeownership rate among recent immigrants. Between 2000 and 2013, 13.7 million foreign-born adults entered the United States, according to Census Bureau data.
In California, the homeownership rate for foreign-born residents in this country for less than five years is 12.7%, according to research published last year by the real estate listing website Trulia. For all foreign-born residents of California the homeownership rate is 48.04%.
In the Bay Area, the homeownership rate for those here less than five years is lower than the state average: in Oakland-Hayward-Berkeley it is 3.1%; in San Jose-Sunnyvale-Santa Clara, it is 2.4%; and in San Francisco-Redwood City-South San Francisco, it is 2%.