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Holden Lewis, Real Estate Watch

Published: Friday, Mar. 25, 2005

Immigrants are increasingly getting the message: “Welcome to America. Now buy a house.�

An immigrant with a scant credit history? Solvable. A family who wants to pool money to make a down payment? That’s just fine. A borrower who is in the United States illegally? Not an insurmountable problem.

The federal government’s policy is to raise the homeownership rate, and the most efficient way to do that is to concentrate on minorities and immigrants. The white homeownership rate is almost 75 percent. A little less than half of black and Hispanic households own their homes, and the Asian rate is a bit higher than 50 percent.

For years, mortgage lenders have had programs for minorities, especially blacks, that involve relaxed credit standards and neighborhood outreach. Now those efforts are being tweaked and expanded for immigrants. There’s a good reason for that: immigrants head more than one in three new households, according to the Harvard Joint Center for Housing Studies. More than 1.2 million immigrants have arrived every year since 2000. Immigrants are where the housing growth is.

The nation’s biggest mortgage lender, Countrywide, markets aggressively to immigrants.

“The major challenge when we’re dealing with multicultural markets is the educational aspects,� says Rodolfo Saenz, Countrywide’s executive vice president of multicultural markets.

Many immigrants don’t know much about this country’s banking system.

“They don’t really know what questions to ask, how to select the best product, what papers and questions will be part of the application,� Saenz says.

Last year, Countrywide introduced its Optimum Loan program, under which borrower education is just one facet. Optimum combines disparate features of many loan products into one:

- Allowing low or no down payment;

- Supplementing the credit record with “nontraditional� credit;

- Recognizing cash income and rent from housemates;

- Permitting the pooling of money for down payment and closing costs.

Mortgages with low or no down payments are relatively common nowadays. Optimum’s three other features are relatively unusual. Take the nontraditional credit records. A lot of immigrants don’t have extensive credit histories in the United States, both because they don’t have many car loans and credit cards, and because they just haven’t been in the country long enough to establish a track record.

Countrywide and other companies, such as credit-scoring titan Fair Isaac, are creating ways to augment meager credit histories with records of utility payments, rent and even money sent to families abroad. They are finding ways to confirm cash income from services, such as child care and landscaping.

Rent paid by long-term boarders is counted as income. Down-payment money from multiple sources is allowed. This last item is important for immigrant extended families.

Most mortgages are for people who can document that they are in this country legally. A few lenders are experimenting with providing home loans to people who have no such documentation. They are called ITIN loans because borrowers use individual taxpayer identification numbers (ITINs). These numbers are provided by the Internal Revenue Service to people who aren’t eligible for Social Security numbers, but who pay federal income taxes.

Colonial is still developing the loan program, which allows the use of nontraditional credit and recognizes cash income. The mortgages are risky because the borrowers are subject to deportation and the loans can’t be sold in the secondary market. So they have higher interest rates - anywhere from half a percentage point to 4 percentage points higher than for a standard, fully documented fixed-rate mortgage. The loans require substantial down payments.

The program requires borrowers to undergo training in homeownership and budgeting, and they have to have bank accounts, says Gloria Barreto, a Colonial loan officer in Dallas. She says some borrowers have misconceptions about the American banking system.

“Sometimes they think they have to stay in the house for 30 years, until they pay the mortgage off,� she says. “I say, ‘No, you can refinance or sell it.’ �

Undocumented Hispanic immigrants would take out an estimated $44 billion in mortgages if barriers to borrowing were lifted, according to the National Association of Hispanic Real Estate Professionals.

Distributed by Scripps Howard News Service.E-mail Holden Lewis at hlewis@bankrate.com.