A dream deferred
Loreto Ramirez, a Mexican immigrant, will wake before dawn this Saturday to plant grapevines and corn behind his new home. When the work is done, he will kick back on his porch and watch the sun fade over the rooftops of St. Paul.
Gudeta Wako, a native of Ethiopia, can do nothing of the sort. He rents a cramped, two-bedroom townhouse on University Avenue in St. Paul with leaking water pipes. He has no porch and no yard.
Both men arrived in the United States in the early 1990s. Both have stable jobs and spotless credit records. Yet only Ramirez, a construction worker, has fulfilled the American dream of home ownership.
The past decade has seen big gains in home ownership rates among many of Minnesota's immigrant communities, but they still lag far behind the ownership rates of whites. Money remains an issue, especially as housing prices and mortgage rates climb, but some housing advocates and bank executives say cultural attitudes and religious beliefs about debt and home ownership are proving equally thorny.
The Hmong language, for example, doesn't include words for mortgage or credit. Religion prohibits some from paying interest on debt, and others see owning property as a burden.
"We tend to assume in this country that everyone makes rational economic decisions," said Allegra Calder, a research analyst at the Joint Center for Housing Studies at Harvard University.
"But there are cultural barriers [to owning a home] that can be every bit as significant as economic ones," Calder said.
Wako, a member of the Oromo tribe from Ethiopia, describes how soldiers seized his family's farms and bank accounts during Ethiopia's Marxist revolution of 1974. Wako himself was arrested and held for eight months in prison, where police hung him upside down from a stick and struck him repeatedly with metal batons. Scars line his back and legs.
The experience left him suspicious of large institutions, including government agencies and banks, that ask questions. "You have to understand ... my people have been through so much that many of us don't want debt," Wako said.
Increasingly, banks are trying to respond to those cultural differences. They've created new programs, relaxed credit limits and recruited employees from those immigrant communities. In some cases, lenders are taking the time to listen to stories such as Wako's. With interest rates rising and the state's demographics changing, lenders realize they must reach out to new borrowers to keep mortgage revenue flowing.
"There are some immigrant groups that simply do not feel comfortable approaching large institutions," said Hector Garcia, Wells Fargo's vice president of business development for emerging markets. "But we don't have the luxury of ignoring them. That's where the growth is."
Lenders get creative
Ramirez is an example of how far lenders are willing to go these days. A year ago, a real estate agent told Ramirez, 35, and his fiancée, Renee Wanna, that they did not make enough money to buy a home in the Twin Cities.
But with the median home price in the metro area now above $200,000, lenders have become more creative and aggressive about extending home ownership to Minnesota's newest arrivals.
Lenders have caught on to the fact that new immigrants are more than twice as likely to have members of their extended family living with them, according to the Census Bureau. Wells Fargo has a mortgage program that allows borrowers to add the incomes of an unlimited number of family members -- including aunts, uncles and cousins -- to the total income needed to qualify for a loan.
Because many immigrants do not have credit records, Wells Fargo, U.S. Bank, TCF Financial and M&I Bank will accept alternative forms of credit -- such as rental payments and utility bills -- as evidence of ability to pay. In addition, U.S. Bank will consider alternative sources of income, including cash payments for odd jobs such as landscaping and housecleaning, when qualifying a borrower for a mortgage.
For Ramirez, TCF found $11,000 in down payment assistance through neighborhood programs. He now owns a two-story, 3,500-square-foot home on a half-acre of land overlooking downtown St. Paul. The family paid $373,000 for the duplex, and rents its bottom floor to five Hispanic men.
Wanna, 35, who grew up in St. Paul's housing projects, beams with pride as she shows off the spacious playroom for their 5-year-old twin daughters, Tiffany and Leticia. "Every now and then I pinch myself and say, 'No, I'm not dreaming. This is for real,' " she said.
Communication gaps
Even with such programs, banks face hurdles with some ethnic groups.
In the Hmong community, language is the first barrier to buying a home. It takes five Hmong words to explain "bank."
"You have to explain that [credit] means you get money today but you pay it back tomorrow," said Pao Yang, home ownership program manager at Community Neighborhood Housing Services Inc., a nonprofit group in St. Paul that helps immigrants and low-income families obtain mortgages.
That inexperience breeds distrust, mortgage lenders say. Hmong borrowers frequently back out of mortgage transactions at the final moment because they don't understand the terms and fear they might be getting a raw deal.
"They tend to shop around and talk to too many people," said Choua Yang, a mortgage consultant of Hmong descent with Wells Fargo. "Part of it is they don't understand the [mortgage process], so they get suspicious."
It's not uncommon for Hmong families to request 20 or more meetings with a loan officer before deciding whether to apply for a mortgage. And Hmong couples also are much more likely to have extended family in their homes, which means parents, siblings, aunts and uncles often have a say in whether to proceed with a loan.
The upshot is that many loan officers find excuses to turn down Hmong borrowers because their applications consume too much time, said Billy Heu, a mortgage broker with Twin Cities Home Loan Corp. in St. Paul.
"With some [Hmong] families, it can take six months to close a mortgage. A lot of loan officers don't want to work that hard," Heu said. "They just give up and move on to a client that is fast and easy."
But the obstacles facing Minnesota's Hmong population are surmountable, housing advocates say. As they assimilate, future generations will become less suspicious of credit, and banks will be more eager to loan them money, said Arthur Rolnick, senior vice president with the Federal Reserve Bank of Minneapolis, who co-wrote a study on borrowing habits among Hmong businesses.
Though still low, the rate of home ownership among Hmong families has more than quadrupled, from 13 percent in 1990 to 59 percent in 2000. That compares with 77 percent of whites.
"My parents didn't speak English, and they didn't understand why they need a 30-year mortgage [to buy a house]," said Teng Xiong, an 18-year-old Hmong student who lives in St. Paul. "But it's different with me. I don't want to pay rent all my life. Getting a house is one of my top priorities."
Aversion to owning
For other immigrants, the problems are more intractable. Minnesota is home to an estimated 35,000 Somalis, many of whom come from nomadic tribes that consider home ownership a burden, said Safia Omar, housing advocate for the Somali Community of Minnesota. Others are wary of buying homes because they have vague hopes of returning to Somalia when the fighting in that country stops.
"The nomadic life runs in our blood," said Omar, who is from Somalia. "It's difficult to commit to a mortgage when you expect to move every two years."
Faith is another barrier. Nearly all Somalis are Muslims, and many of them take seriously the admonition in the Qur'an against paying or receiving interest, according to the Confederation of Somali Community in Minnesota.
Abdi Rahman figures he has paid enough rent in the past decade to have made down payments on several new homes.
But Rahman, 42, an observant Muslim, has sworn he will never pay interest. He would like to buy a home with cash. But with 12 children and a salary of just $30,000 a year, Rahman reckons he will die before he raises enough money.
"My wife said, 'Look, why don't we buy a house?' " he said. "I said, 'Listen, who gives you life? God gives you life. If you follow God, he will provide for you.' ... I don't want God staring down at me on judgment day, asking, 'Abdi, why did you pay this interest?' "
For Muslim immigrants, this prohibition against paying interest has far-reaching consequences. A home is one of the most important sources of funds for starting new businesses. Immigrants who rent are far less likely to move up the economic ladder than those who own homes, researchers say.
A decade-long debate
Abdul and Ayida Mohammed, a Muslim couple from Ethiopia, have debated the morality of getting a mortgage since they married a decade ago. Earlier this year, after consulting with several close relatives, they decided it was a worse moral offense to deprive their children of a yard and a source of future wealth than to pay interest.
"God never said that we aren't allowed to own a home," said Abdul Mohammed, who recently bought a home in Brooklyn Park.
A handful of small banks have found ways to circumvent the Muslim prohibition against interest. A group called the American Finance House-LARIBA of Pasadena, Calif., has a mortgage program in which borrowers pay an annual fee, or rent, instead of an interest payment. American Finance House has made $150 million in mortgages in 36 states, including Minnesota, since the program began three years ago. And University Bancorp, a small bank in Ann Arbor, Mich., recently began a rent-to-own program geared toward devout Muslims.
"Eventually, banks will wake up and realize that if they can avoid the word 'interest' they could attract millions of new [mortgage] customers," said Ojuang Okello, a real estate agent with Coldwell Banker Burnett in Minneapolis who represents many Muslims. "Whoever does it first will make a lot of money."
Chris Serres is at cserres@startribune.com.
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