Working toward American Dream..some banks aid w/mortgages
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Working toward the American dream
Banks' mortgage plan opens door to homeownership for illegal immigrants, but some want to lock them out
Wednesday, April 06, 2005
BY KATHERINE REYNOLDS LEWIS
NEWHOUSE NEWS SERVICE
Dalila and William Timal look like any other couple signing a home mortgage. They've picked out paint colors for their new four-bedroom house and can't wait for their 18-month-old son to play in the yard.
But they differ from others you'd sometimes see at a loan officer's desk: Neither is a U.S. citizen nor a legal resident. The Timals came to this country from Guatemala in the late '90s and illegally overstayed their visas.
They are the beneficiaries of a new program by Fifth Third Bank that bases mortgages on an individual taxpayer identification number, or ITIN. Nationwide, increasing numbers of financial institutions offer such loans, including in New Jersey, where half of the state's estimated 1.6 million foreign-born residents are not American citizens.
Lendersview customers like the Timals as part of their communities, not to mention a critical business opportunity. Just among the nation's roughly 6 million undocumented Latinos is a potential $44 billion market for homes, according to the National Association of Hispanic Real Estate Professionals.
"People need a place to live," said Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, which offers financial advice to new immigrants. "Over the years, banks have set alternative standards that have allowed them to loan money. In this situation, banks have adjusted their lending criteria."
A person requests an ITIN from the Internal Revenue Service if he or she isn't eligible for a Social Security number, but must file a tax return. And while groups opposed to illegal immigration have pressured the IRS to work with immigration officials, experts say U.S. Immigration and Customs Enforcement concentrates on deporting violent criminals and people suspected of terrorist connections.
Jamie Gilmartin, a spokeswoman for the N.J. Department of Banking and Insurance, said the state's Banking Advisory Board, comprising industry representatives, heard a presentation earlier this year on the use of ITIN in mortgage lending.
Gilmartin said mortgage lenders are allowed to "make the business decision" whether to make loans based on ITINs.
The growth of ITIN mortgage programs is an example of how day-to-day life in America has adapted to the reality of as many as 10 million undocumented immigrants. Between 832,000 and 900,000 live in New Jersey, according to U.S. Census Bureau's American Community Survey.
The IRS accepts their tax payments, employers recruit them, and companies seek them out as customers. Yet they have no legal right to work or remain in the United States, and are denied full benefits afforded to citizens.
To buy homes, many have used a borrowed or false Social Security number, jeopardizing their legal right to the property. Without access to the traditional banking system, they have been easy targets for predatory lenders charging excessive interest.
Antron Daily, a senior broker at Bloomfield-based Commonwealth United Mortgage, said the company is testing the use of ITINs because undocumented immigrants represent a potentially important source of new business.
"It's not like you're giving something to someone who doesn't qualify," he said. "We have a lot of Dominicans, Nigerians, Brazilians and a lot of everybody in New Jersey. They have blended into the society. So long as you can document two years of residency, and show you've been financially responsible, why not?"
Araceli and Javier, a Milwaukee couple, heard horror stories of immigrants losing their homes because of ballooning mortgage payments. But when they recently bought the house they were renting, they used an ITIN to get a fixed-rate mortgage that replaced their $600 monthly rent with a $454 mortgage payment. They send the bank $600 a month anyway, to pay off the loan early. They agreed to be interviewed on the condition their last name not be used, for fear of immigration enforcement.
Their lender, Mitchell Bank, hasn't had a single late payment or delinquency on the $3.5 million of ITIN mortgage loans it has made since 2000, James Maloney, chairman, said. "These are our best-performing assets," he said. "These are folks who are appreciative of the fact that we're willing to take a chance on them."
At Texas Bank in Fort Worth, ITIN mortgage customers often come in person after a sweaty day's work to make loan payments in cash, Joe Barnhart, president of the mortgage division, said. The program is so popular that once in a while, someone with a valid Social Security number submits an ITIN application.
"Most of these loans don't get refinanced; most of these houses don't get sold and paid off compared to other groups of loans, which makes them more valuable to us," Barnhart said. "A much larger proportion of these borrowers pay ahead on their loans than the general population."
Detractors criticize the mortgages as encouraging illegal immigration, which strains the country's infrastructure and opens the door for terrorists.
"It is a threat to national security and public safety and is morally bankrupt," Dan Stein, president of the Federation for American Immigration Reform, a Washington-based group that favors tighter immigration controls, said. "It breeds ultimate contempt for laws."
Banks "ought to be part of the solution in ensuring that people who apply for mortgages and conduct other business are here legally," Stein said. "They went down the road of making a fast buck in a way that is frankly, in our view, inconsistent with the spirit of patriotism and federal law."
Supporters of ITIN mortgages point to the benefits that accrue when renters become homeowners: Crime drops and real estate values rise as residents take better care of houses and invest time and money in the community. "People who own their own homes have a much greater stake in their neighborhoods," Riley said.
Critics often overlook the fact that many households with an undocumented immigrant also include a legal permanent resident or U.S. citizen, frequently a child who was born here, said Harry Pachon, president of the Los Angeles-based Tomas Rivera Policy Institute, which researches issues that affect Latino communities.
"Everybody likes to think of this as a dichotomy where you're legal or you're illegal; it's really a pipeline," Pachon said. "Today's illegal immigrant is tomorrow's legal resident."
In addition to accepting ITINs, banks are being flexible when they look at creditworthiness, since many immigrants don't have a traditional credit history, Anna Paulson, a senior economist at the Federal Reserve Bank in Chicago, said. For instance, the bank may consider rent and utility bill payments, or a history of sending money to family overseas as evidence that a customer is a good risk.
And there are signs the ITIN mortgage market is maturing.
One company, Milwaukee-based Mortgage Guaranty Insurance, now offers private insurance on the loans, which reduces risks for banks and makes the mortgages easier to resell. The Federal Deposit Insurance Corp. is helping a group of Midwest banks to develop ITIN programs.
Freddie Mac, the Federal Home Loan Mortgage, is studying whether to buy the mortgages from banks, spokesman Douglas Robinson said.
Without the participation of a major institution like Freddie Mac or Fannie Mae, the Federal National Mortgage Association -- which together holds 37 percent of U.S. residential mortgage debt -- the spread of ITIN mortgages will be limited, Paulson said. Right now, most banks making the loans must hold onto them, rather than selling them for cash that could be used for additional mortgages.
"This is a bottleneck in this market," she said.
