Russkaya Reklama has already published an article about how an increasing number of credit and financial institutions in the United States are extending mortgages to undocumented workers. It is interesting that these seemingly risky mortgage transactions actually cause little anxiety on the part of lenders.
It turns out that undocumented immigrants are the most reliable borrowers. Banks use the individual taxpayer identification number (ITIN) – issued to individuals who do not have a Social Security number but who want to pay taxes – to process loans. This is how loans to undocumented immigrants came to be known as ITIN mortgages. Before 2000, financial institutions refused to extend mortgages to people residing in the United States illegally. But banks ended up changing this policy because they saw an opportunity to turn undocumented immigrants into clients.
This is just a small segment of the real estate market, but it is growing dynamically. Also, realtors’ reports confirm that undocumented homeowners have few problems with financial discipline.
One such recent report claims that among homeowners whose mortgage payments are over 90 days in arrears, 0.5 percent hold ITIN mortgages, one percent hold prime mortgages and 9.3 percent hold subprime mortgages.
“We have no complaints about illegal immigrants as clients,” said Scott Hastings, director of the marketing department at Citizens Home Loan Inc., in an interview with The Wall Street Journal. "This is our second year working with them and they now account for 20 percent of our business. This is one of the most promising directions of our business. Spanish-speaking homeowners put their mortgage payments first on their list of monthly expenses," said Hastings. Citizens Home Loan Inc. has branches in 33 states.
Experts believe that this notion of financial responsibility can be found not only among Latinos, but also among other groups of illegal immigrants who dream of becoming U.S. residents.
Undocumented immigrants are generally workers who are paid very little. But they manage to attain a piece of the American dream anyway.
Naturally, banks do not offer loans without a thorough analysis of strict selection criteria. Bank managers require that ITIN mortgage applicants present them with copies of their tax returns for the last two years. Additionally, managers carefully study utility bills, records of money transfers home and even receipts for goods purchased at supermarkets and small stores.
“Illegal immigrants go through a rigorous process to prove that they are reliable," said Michael Zimmerman, vice-president of MGIC Investment Corp. in The Wall Street Journal, "but then they obtain credit at a fixed rate under favorable conditions.”
The Hispanic National Mortgage Association (HNMA), an organization devoted to supporting undocumented homeowners, introduced an important initiative several months ago. This association, known as Hannie Mae (a scaled-down counterpart to the mortgage giants Fannie Mae and Freddie Mae, which together control almost half of all mortgage loans in the United States), began to acquire loans issued by various credit companies so that it could provide aid if needed. HNMA also helps banks run credit checks on undocumented immigrants.
In supporting an initiative of the Federal Deposit Insurance Corp. (FDIC), one of the pioneers in developing the idea of issuing residential mortgages to undocumented workers, banks in the Midwest – particularly those in Chicago – have become the most active in the country in working with undocumented immigrants.
Three years ago Chicago played host to a conference where representatives from the FDIC and the Federal Reserve came out in support of offering multiple services to undocumented immigrants.
Following the lead of credit and financial institutions in Illinois, banks in Georgia, Texas, Indiana and Wisconsin are now also active in the ITIN mortgage market. They handle over 70 percent of all ITIN mortgages issued by Mr. Zimmerman’s company.
Even though the largest banks in the United States are interested in undocumented immigrants, it is the small- and medium-sized financial institutions that actually work with them. It is not that these large banks are worried about losing their money. After all, the experiences of smaller banks prove that undocumented immigrants are reliable partners.
Rather, financial giants have decided to wait because of political considerations. Their directors fear a wave of criticism from opponents of undocumented immigration who believe that any indulgence granted to the undocumented is a crime against the government.
Southern California based Wells Fargo &Co. is a good example. At first this company was very aggressive in engaging undocumented borrowers, but then it scaled back its activities. Spokespeople for the company declined to explain why, but experts agree that the decision had nothing to do with economics.
However, bankers have been unnerved by recent threats from the Department of Homeland Security directed at employers who hire illegal immigrants. If business owners start firing undocumented workers, these workers will simply not have the money to pay off their mortgages.
According to the National Association of Hispanic Real Estate Professionals (NAHREP), the total sum of loans issued to undocumented immigrants amounts to $85 billion. It is not hard to imagine how damaging things could become for credit and financial institutions, as well as for the real estate market, which at the moment is not in the best shape.
Banks that have already initiated mortgage transactions with undocumented immigrants plan to stand behind their clients who have ITIN mortgages should these clients lose their jobs. (What choice do they have?)
“We have already sent letters to people who are paying off ITIN mortgages,” said James Mahoney, director of Mitchell Bank in Milwaukee. “We are encouraging them to let us know as soon as they start having financial problems. We will solve these problems together.”
