June 13, 2008
By Deborah Hirsch
When Miguel left Mexico for the Carolinas, he planned on staying for a year.
That was five years ago. Now, he has a wife, a 1-year-old son and a mortgage that he got in February without a Social Security number.
“It wasn't difficult at all,” Miguel says.
Though illegal immigrants can't get a driver's license in North Carolina anymore, they can still be approved for a home loan.
With an individual taxpayer identification number (ITIN), good credit and proof of tax filing, those who aren't legal permanent residents can qualify for a fixed-rate “ITIN mortgage.”
The estimated $3 billion ITIN mortgage market makes up only a tiny fraction of the overall U.S. mortgage market, which originated $2.4 trillion in loans last year.
Yet the borrowers who have ITIN mortgages have proven to be some of the sturdiest as foreclosures climb to record highs.
Banks aren't required to keep track of how many ITIN home loans they give, so it's difficult to find accurate data on them.
But according to estimates from the Hispanic National Mortgage Association and local lenders, less than 1 percent of ITIN loans have gone into foreclosure. That compares with 1.2 percent for prime mortgages and nearly 11 percent for subprime mortgages given to borrowers with poor credit history, according to the latest available data from the Mortgage Bankers Association.
Even with the economic downturn and rising immigration crackdowns threatening jobs for undocumented workers, the national numbers appear to be holding up in North Carolina. Among six banks in the Carolinas that have made an estimated 2,800 ITIN loans, 27 mortgages have gone into foreclosure.
Banco de la Gente, which has five branches across the state, reported seven of those. President Manuel Rey said four were caused by deportation, two by divorce and one by economic hardship.
Lenders predict that ITIN loan performance won't falter much even if the mortgage market continues tanking.
As for new loans, they say local demand remains steady even though the credit crunch now makes it harder to get one.
ITINs began around 2000
The Internal Revenue Service has issued more than 12.5 million taxpayer ID numbers since 1996 to foreigners who weren't eligible for a Social Security number, including visa holders legally in the U.S., spouses of U.S. citizens and undocumented workers.
Community banks and credit unions began accepting the nine-digit numbers from mortgage applicants around 2000, most of them illegal immigrants with modest incomes. By law, banks must verify customers' identity, but they don't have to check immigration status.
Mostly smaller banks are making the loans.
A few large banks began accepting them in pilot programs, although many, including Bank of America, still shy away from this controversial community.
Wachovia and Winston-Salem based BB&T take them in limited cases from legal permanent residents or those allowed to be in the U.S. with a visa.
Lenders say the mortgages have held up for a number of cultural and practical reasons:
Illegal immigrants who are serious enough to buy a home typically have families, steady jobs and a sense of community. They're especially careful to follow the rules to avoid drawing negative attention to themselves – and their legal status.
Immigrants often pay their mortgage before anything else, out of pride. They don't want to have to tell relatives back in their native countries that they couldn't keep a house or lose respect from a local Hispanic-oriented bank.
Smaller institutions geared toward Latino borrowers tend to be more careful about who gets approved for loans. They scrutinize ITIN applicants and may require more documents than they would for others, even subprime applicants. In addition to credit scores and tax documents, banks could ask to review utility or cell phone bills, rent payments and even receipts showing money sent home to relatives.
Latino immigrants buy homes they can truly afford because they're looking for a place to live, not something to turn around for a profit.
Latino immigrants frequently live with other adult family members, which means a higher household income and more people contributing to mortgage payments. If someone gets deported or loses a job, others can pick up the slack.
Miguel, whose last name has been withheld, was laid off from a job with a decorative rock company in Chester, S.C., not long after closing on his $70,000 house in Lancaster, S.C. But the 26-year-old hasn't had problems making mortgage payments because his wife, his sister and her husband, who also live with him, have jobs and pitch in.
Miguel said he still wants to return to Mexico some day, though he's now anchored to his Lancaster home. But he's not worried about having to unload a house yet.
“My son was born here. I don't want to take him back to Mexico until he's learned English,” Miguel said. “If I get a legal status, I can go and come and that's my dream.”
Foreclosed homes an option
Lenders said they wouldn't be surprised if “ITIN mortgage” foreclosures eventually go up because immigrants aren't immune to the state of the economy. But unless the government starts systematically deporting hundreds of illegal immigrants a day, lenders said they see no reason for ITIN loan performance to drastically deteriorate.
Local bank leaders said they've actually seen the same if not more demand for home loans from illegal immigrants. Foreclosed properties have emerged as affordable options for some of them.
“In crisis is opportunity,” said Scott Hastings, marketing director for Charlotte-based Citizens Home Loan Inc. “People that come to this country from outside see opportunity … to pick up depressed real estate and go for the long term.”
Interest may be up, but lenders agree that it has become harder for qualified candidates to get an ITIN loan. In the wake of the mortgage meltdown set off by shaky subprime loans, underwriting has become tougher for any loan that smells a little risky.
“Banks are afraid to give these types of loans,” said Rey, the Banco de la Gente president. “We're treated like subprime.”
Rey said closings have dropped since October because the bank's financers are more strict. He said his bank still gets 50 to 70 applications a month, but now averages about nine closings instead of 30.
Another problem: The largest secondary market ITIN buyer in the nation stopped purchasing the loans in January.
The San Diego-based Hispanic National Mortgage Association (also known as HNMA or by the nickname “Hannie Mae”) began a joint venture with Deutsche Bank to package the loans into securities for investors in late 2006. That secondary market helped lenders spread risk and gain capital to make more loans. Now, the number of ITIN loans that lenders can give will be limited to how much they can afford to keep in their portfolios.
HNMA chief executive Leonardo Simpser said his company won't default on the $200 million in loans it has acquired so far, but there's no way to buy more “unless the secondary market comes back or we find significant investors.” He thinks that's not likely for at least a year.
María, 38, said she feels lucky that her loan application was approved by a credit union last summer.
She and her husband moved to the area from Mexico about seven years ago, their three sons joining them later. After all that time, María said she wanted to make an investment that might one day pay for itself or even bring in a little money.
They found a three-bedroom, 2.5-bath house in southeast Charlotte that had gone into foreclosure and bought it for $116,000. The couple and their two oldest sons all contribute to the mortgage. It's harder now with rising food and gas prices, María said, but “we can make it.”
She said she's glad immigrants have the opportunity to become homeowners.
“The only thing we want to do is work, not bother anyone or take anything away from anyone,” she said. “I came with a lot of dreams and I've achieved many of the things I've been hoping to. I've been very happy since I bought my house. I hope to continue this way.”
Source: The Charlotte Observer
