Mortgages for illegal immigrants - Goal of attracting Hispanic market also creates window for segment
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HispanicTrending: Mortgages for illegal immigrants http://juantornoe.blogs.com/hispanictrending/2007/07/mortgages-for-i.html
Mortgages for illegal immigrants
Goal of attracting Hispanic market also creates
window for segment
July 29, 2007
By RICK ROTHACKER
As part of an effort to tap a burgeoning Hispanic market,
banks are increasingly experimenting with mortgage loans
that can be obtained by illegal immigrants.
A growing number of financial institutions, including some
in the Carolinas, are accepting Individual Taxpayer
Identification Numbers on loan applications in lieu of Social
Security numbers. The IRS issues so-called "ITINs" solely
to process tax payments, regardless of immigration status.
The loans, which represent a fraction of the more than $2
trillion annual mortgage market, are legal. Banks are
required to verify the identity of their customers for
anti-terrorism and money-laundering purposes but don't
have to check immigration status.
Mortgages are part of a broader push by banks to appeal
to a Hispanic demographic, including immigrants and U.S.
citizens, that is growing faster than the general population
and has a lower homeownership rate. Banks and Hispanic
community advocates say underserved Latinos deserve a
chance at the American dream and financial stability.
There's also big business at stake as much of the
mortgage market slumps.
Critics say lenders are encouraging illegal immigration and
helping lawbreakers stay in the United States. Earlier this
year, they leveled the same criticism at Charlotte-based
Bank of America Corp. for testing a credit card in Los
Angeles that can be obtained by individuals without Social
Security numbers.
The loans highlight the dual treatment of Hispanic
immigrants in the U.S. While border patrols look to stop
them from entering the country, businesses covet them as
customers and the IRS issues them numbers to pay taxes.
Legislation designed to ease this tension failed in the
Senate last month, amid complaints the bill would provide
amnesty to immigrants who had violated U.S. laws.
There's no indications banks are breaking the law, but the
loans are "problematic" because they "facilitate the illegal
presence of individuals in this country," said Homeland
Security spokesman Russ Knocke. "What it underscores is
the need for comprehensive immigration reform," he said.
Banks embrace ITIN
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ITIN mortgages began over the past few years with small
community banks and credit unions, but bigger banks are
now eyeing the market. Wells Fargo & Co. and Citigroup
Inc. have pilot programs under way, and JPMorgan Chase
& Co. is considering one.In the Carolinas, smaller
institutions such as Banco de la Gente, the Latino
Community Credit Union and Citizens Home Loan Inc.
accept ITINs. Wachovia Corp. and BB&T Corp. take them
in limited cases from customers allowed to be in the U.S.
Banks that do not accept them include Bank of America,
SunTrust Banks Inc., RBC Centura and First Charter Corp.
A sign of the market's growth came late last year when the
Hispanic National Mortgage Association began a joint
venture with Deutsche Bank to buy ITIN and other
mortgages from the lenders that originate them. HNMA
Funding packages the loans into securities for investors.
Such a secondary market helps lenders spread their risk,
gain capital to make more loans and offer better rates to
borrowers. In the recent meltdown in the mortgage market
for borrowers with spotty credit, however, Wall Street
investors have faced blame for spurring riskier loans.
The new venture provides automated underwriting
services designed to help lenders analyze Hispanic
borrowers with nontraditional or skimpy credit histories. So
far, HNMA Funding has acquired more than $100 million in
loans, chief executive Leonardo Simpser said.
The ITIN mortgage market has only generated about $2
billion in loans overall, but it's growing, Simpser said.
"Originations have been accelerating," he said, "and more
and more players are in the market."
Hispanic boom
For years, banks have strived to attract Hispanic
customers to boost a slow-growth business.
Looking to sell checking accounts, money transfer services
and now loans, they've hired bilingual tellers, partnered
with community groups and translated brochures into
Spanish. Bank of America and BB&T even sponsor a
Spanish mini-series called "Nuestro Barrio" that offers
lessons about banking, homeownership and other life
skills. In the Charlotte area, the Hispanic population was
about 112,637 people in 2005, or about 8 percent of the
total. Latinos, though, accounted for only 2 percent of
single-family home owners, according to 2000 census
data, the latest available.
"It's really important to the economy as a whole and to the
real estate market in particular that Latinos be able to
purchase a home," said Tim Ready, director of research at
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p , y,
the University of Notre Dame's Institute for Latino Studies,
which issued a report last month on Hispanic housing,
including the use of ITINs.
Hispanic immigrants, however, face a number of
challenges when buying homes, experts said. Many
Latinos are wary of accumulating debt, which means
they're not building a credit history. They have to
overcome an ingrained distrust of financial institutions and
can struggle making complex financial transactions in
English.
Immigration status is another issue. About 53 percent of
Hispanic households are headed by individuals not born in
this country, according to the Institute for Latino Studies.
The Pew Hispanic Center has estimated there are as
many as 12 million unauthorized immigrants in the U.S. --
about 390,000 in North Carolina and 55,000 in South
Carolina.
Enter the ITIN, which allows banks to meet requirements
that they check their customers' identities and collect an ID
number.
The IRS issues ITINs to individuals required to file a tax
return but who can't obtain a Social Security number.
These may be used by visa holders legally in the U.S. or
spouses of U.S. citizens, but they also can be obtained by
illegal immigrants. The IRS issued a total of 10.8 million
ITINs from 1996 to 2006.
The National Association of Hispanic Real Estate
Professionals estimates the potential ITIN mortgage
market has grown to $80 billion from $44 billion just two
years ago. Tim Sandos, the organization's chief executive,
argues that these individuals deserve a chance to buy a
home because they have declared themselves to the
government, and, in many cases, have begun the lengthy
process of earning permanent residence status or U.S.
citizenship.
The opposition
Critics, however, insist banks should accept only verified
documents that can be obtained by U.S. citizens and legal
residents. William Gheen, head of Raleigh-based
Americans for Legal Immigration PAC, earlier this year
launched a boycott against Bank of America over its credit
card program."It's against federal law to induce an illegal
alien to enter the U.S. and aid and abet them staying in the
country," he said.
In the last session of Congress, a Republican
congresswoman from Banner Elk, Rep. Virginia Foxx,
introduced a bill that would require federal agencies that
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introduced a bill that would require federal agencies that
insure mortgage loans to check Social Security numbers of
applicants. Foxx's spokesman said she opposes the use of
ITINs for loans and plans to bring the bill back up again.
Meanwhile, banks that accept ITINs say the loans have
performed well. The Hispanic National Mortgage
Association said less than 1 percent of the loans it has
acquired are delinquent. In the $20 million-plus mortgage
portfolio at Durham-based Latino Community Credit Union,
only one borrower facing a personal crisis is delinquent,
chief executive Luis Pastor said.
"These are people," he said, "who want to invest long-term
in their homes and build neighborhoods."
Attractive Demographics
48
Percent of Hispanic households own homes, compared to
67 percent for the general population.
• The Latino population is expanding faster than other
ethnic groups, accounting for almost half of the nation's 2.9
million in population growth in the year ended July 2006.
Source: U.S. Census, Institute for Latino Studies at the
University of Notre Dame.
Bank of America's Mortgage Stance
Bank of America, which has faced criticism for testing a
credit card that doesn't require a Social Security number,
has decided not to use Individual Taxpayer Identification
Numbers for mortgages for "safety and soundness"
reasons, said Glenda Gabriel, neighborhood lending
executive.Still, she said the credit card, which requires a
bank account and has a $500 limit, fits the bank's strategy
of aiding customers in building a credit history to enter the
financial mainstream.
"If you can help someone get a checking account
established, their credit (established), that certainly helps
them at a later point in time to apply for a mortgage," said
Gabriel, who wouldn't rule out accepting ITINs in the
future.
Like a number of other banks, Bank of America works with
Hispanic community groups and offers alternative ways to
check credit histories. This includes examining utility and
rent payments.
Among the bank's customers are Ena Perez and her
husband, Adan. Both of their parents were immigrants, but
they are U.S. citizens. They took out a Bank of America
mortgage after going through a counseling session and
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receiving a grant from a neighborhood development
program that allowed them to pay off medical debts.
The couple, who both work at a construction company,
moved into a home on the north side of Charlotte on July
1. "Everyone has that dream of the little house with the
white picket fence out front," Ena Perez said.
Bank Policies on ITIN Mortgages Vary
Here's a look at some of the banks that are accepting
Individual Taxpayer Identification Numbers on loan
applications:
• San Francisco-based Wells Fargo & Co., one of the
nation's biggest mortgage lenders, launched a pilot in
Southern California in late 2005. The bank said it hasn't
made a decision to expand the program, which requires
customers open a bank account, pay taxes for two years
and prove two years of residency.
Wells spokeswoman Hillary John said having an ITIN
doesn't necessarily mean an individual is in the U.S.
illegally and noted the bank's job is to verify a customer's
identity. "The government's responsibility is to enforce
immigration laws," she said
• At Wachovia Corp., the bank is gearing up to serve more
Hispanic customers as it expands into Texas and
California. For a number of years, the Charlotte bank has
accepted ITINs from nonpermanent resident aliens, which
are individuals allowed to live and work in the U.S. for a set
period of time. The bank requires borrowers to be legal
U.S. residents, a spokesman said.
• Winston-Salem-based BB&T Corp. has taken ITINs since
2004 for mortgages, but customers must be legal
permanent residents or have another visa status allowing
them to be in the U.S., a spokesman said. ITIN loans
account for less than 1 percent of the bank's mortgage
portfolio, he said.
• Nuestro Banco, a Raleigh-area bank slated to open next
month, plans to offer ITIN mortgages as part of an array of
products and services geared to the Hispanic market. The
community bank will check for proper identification but not
immigration status, said chief executive David Flores.
Source: Charlotte Observer
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