The National Association of Hispanic Real Estate Professionals (NAHREP) today announced a new Code of Trust, a set of ethical practices for its members. The code was developed to address the abuses that helped fuel the current foreclosure crisis and shrinking availability of credit, says NAHREP president and CEO Tim Sandos.
The Code of Trust sets requirements for mortgage originators; real estate licensees and Realtors; builders; and other real estate professionals, such as home inspectors, title, escrow, and other loan closing services. The principles include:
- Stronger licensing and industry education requirements
- Quality controls, such as prime loan filters that would ensure that borrowers who qualify for prime loans are offered them
- Increased disclosure to allow borrowers to make informed decisions
- Development of a bi-lingual guide to educate consumers on all choices of products
- Protections against conflicts of interests
- Full compliance with all state and federal laws.
Working with the Conference of State Bank Regulators, the code also advocates the establishment of a whistle-blowers' hotline for industry professionals and consumers to report allegations of misconduct or predatory practices and a peer-review process to examine abuses and hand out sanctions.
"The focus is to regain and maintain the consumer's confidence in the market as a whole and every real estate professional touching the transaction," Sandos says. "We want to create an ethical code of conduct so customers know what to expect."
The organization also sees the code as a tool to increase sustained homeownership in the Hispanic community, Sandos says. "The emphasis is on the word, 'sustained,'" he says. "It's no good to put someone into a home they lose two to three years down the road."
The National Association of Realtors (NAR) was quick to praise the effort as an important step toward eliminating predatory lending.
"As one of the first trade groups to adopt mandatory ethical standards for its members, the National Association of Realtors applauds NAHREP's Code of Trust," says NAR President Pat V. Combs. "NAR encourages everyone-government agencies, lenders, individuals, and real estate professionals-to work together to fight abusive lending practices so that the American dream doesn't turn into a family's worst nightmare."
The impetus for the code of conduct was surveys NAHREP has done over the past 18 months with its own members, who reported that Hispanic borrowers are disproportionately vulnerable to predatory lending practices because they lack knowledge of the home buying process. Nearly half of Hispanics who have a subprime loan would have qualified for a prime loan, the organization reports, and foreclosures in the Hispanic community are expected to reach $52 billion in 2008-more than double the amount projected for this year.
That research is backed up by a Sept. 5 study from the Association of Community Organizations for Reform Now (ACORN). That study reported that Hispanics and African-Americans were more than twice as likely as whites with similar incomes to have a subprime loan.
"Our members have told us there is a crisis in trust," Sandos says, both from consumers who aren't confident that real estate professionals have their best interests at heart and from investors who have backed away from the mortgage industry because they've lost confidence in the underwriting criteria of the loans. Regaining that trust is a critical first step in turning the market around, and NAHREP wants its members to set a good example.
Orlando, Fla.-based Rey Homes understands the need for that kind of commitment. Owner Tony Rey Sr., emigrated to the U.S. from Cuba in 1970 and settled in Orlando, where he worked construction while learning to speak English and attending community college. He opened his company, Rey Homes, in 1978, and today has a large Hispanic customer base.
"As a Hispanic-owned business we feel it is important to not only protect our consumers, but also educate them on the benefits of homeownership and the responsibilities it entails," says Rey's sales and marketing manager Patrick de la Roza. "We strive to build relationships with our homeowners so that we become the source of knowledge and someone they can trust throughout the process. Anyone can sell a home, but creating a relationship takes effort and sincerity."
Click here (PDF) to view the NAHREP Code of Trust.