The mortgage industry, like the country, is at a cultural crossroads.

As the millennium approaches, the rapid growth of minority. and foreign-born populations is changing the face of the nation - and of the typical homebuyer.

Up to now, mortgage lenders have been stepping up their efforts at minority lending lending largely in response to political and regulatory pressure.

But many in the industry are starting to view new immigrants and other members of minority groups as a business opportunity that simply cannot be over-looked. As a result, they are scrambling to adjust their lending policies.

Stephen B. Ashley, president-elect of the Mortgage Bankers Association of America, says: "I have seen numbers that indicate that as much as 40% of our business in the next decade will be minority based. I don't know any industry that doesn't view a 40% segment of the market as a significant opportunity."

Strong Prospects

In fact, the 1980s' 8.7 million immigrants accounted for 40% of the decade's population increase. And they tended to be in the prime of life as well as better educated and more hopeful than native-born minorities, according to a report published by Harvard University.

"There's an enormous market out there, and those who find it first will prosper," says William C. Apgar Jr., executive director. of Harvard's Joint Center for Housing Studies, which annually publishes a report called State of the Nation's Housing.

The report shows a country of increasing and irreversible diversity. The Asian-American population more than doubled in the last decade, Hispanics increased their numbers by more than 50%, and the African-American population grew by 12%.

In comparison, the non-Hipanic white population increased by a mere 4%. By the end of the century, 29% of the population will be from other groups.

Challenge to Lenders

Howard J. Levine, chief executive of Bank of New York's Co.'s mortgage unit, says the surge in immigration holds great promise for mortgage lenders who adapt to the country's changing ethnic face.

And those that don't? "The ship's going to pass them by," says Mr. Levine, whose company is based near Los Angeles,

He and other lenders in major metropolitan areas - the so-called gateway cities where new immigrants cluster - say that lending to minorities is not inherently risky. All that is needed, these lenders say, is a willingness to understand some different approaches to money and credit.

For instance, immigrants are willing to sacrifice more to own a home, Mr. Levine says, and in fact devote more of their income to homeownership. This flies in the face of long-standing rules used by banks to determine how much of a home a family can afford.

Reaching the Customer

Some simple things, like advertising in Spanish or Chinese or hiring people from new immigrants' ethnic groups as credit analysts and loan officers, can dramatically improve a lenders' ability to make mortgages.

"The more you can do in a person's native language, the more comfortable the customer is," says Tammy Rivera, who is in charge of marketing to minorities at Home Savings of America, the country's largest thrift.

Currently, 10% of business at the Irwindale, Calif.-based thrift is generated by Hispanics, and nearly the same amount by Asians.

Down-Payment Problem

Ms. Rivera says the usual advertising is often not cannot reach recent immigrants. News of Home Savings' multilingual ability, for example, spread throughout immigrant communities by word of mouth, not advertising.

Another major barrier to minority and immigrant homebuying is cash requirements.

The industry is virtually unanimous in acknowledging that down payment and closing costs are an enormous hurdle for many young homebuyers from minority groups.

Efforts to lower this barrier have shown mixed results, A low down payment can be an invitation to default - after all, the buyer has little or no equity at stake. But default badly tarnishes the buyer's credit and leaves little hope of another chance to buy a home.

Closing costs such as insurance and attorneys' fees are also difficult to lower, though some progress has recently been made on this front.

The Bias Issue

But many believe the most difficult problem facing immigrants and native-born minorities trying to get mortgages is bias in lending.

"It is the system's greatest failure," says David Jeffers, a spokesman for the Federal National Mortgage Association. "No democracy can sustain itself if one side of the population is consistently denied credit."

Prof. Apgar agrees. "The banking industry has to make itself minority-friendly," he says.

Minorities, especially immigrants, perceive banks as unfriendly, intimidating places, he says. He adds that whether the perception is based on fact is irrelevant - the end effect is discriminatory.

"A lot of people get 'turned down' before they even apply - because they think they will be badly treated, so they don't even bother to apply," Prof Apgar says.

Banks must address this problem aggressively if they are want to open up this market, observers say. And fighting the perception of ill will may be the most difficult part of the battle.

"Telling your loan officer to lend fairly isn't going to hack it," Prof. Apgar says.

Mr. Ashley of the Mortgage Bankers Association agrees. Minority and immigrant lending is the industry's great challenge, he says, but also its greatest opportunity.

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