Mortgage Loans For Illegal Aliens?

Are lenders becoming desperate for new homebuyers? Interesting excerpt from Gary North’s Reality Check…

There are not many new buyers or first-time buyers who qualify for loans. So, the mortgage rules are getting changed. Here is a choice example from "The Wall Street Journal" (July 8, 2005).

MILWAUKEE — Javier and Araceli Garcia, illegal immigrants from Mexico, never imagined that the U.S. government would help them realize their dream of owning a home.

But last year, the couple secured a $54,600 mortgage to buy the gray, 1,158 square foot bungalow that they had been renting for eight months. The Wisconsin housing authority financed the loan. The Internal Revenue Service gave them an identification number that enabled them to apply for it at local Mitchell Bank, which was happy to take their business.

"We thought we would never buy a home, because of our (illegal) status," said Mrs. Garcia.

Competition for new customers is driving banks to offer home loans and other financial services to illegal immigrants–and they are getting help from government agencies, such as the Federal Deposit Insurance Corp. The FDIC encourages banks to lend and invest in underserved markets regardless of customers' immigration status.

–End WSJ excerpt–

But wait. What about Social Security numbers? Everyone who applies for a mortgage loan needs to supply his SS number, right?

Wrong.

. . . The housing authority uses the IRS-issued tax registration number, the Individual Taxpayer Identification Number, or ITIN, instead of a Social Security number, which illegal immigrants generally cannot obtain. The banks need such numbers because they have to report their income to the government. In 1997, the IRS started issuing ITINs to foreigners who aren't eligible for a Social Security number to encourage them to file an income-tax return, regardless of immigration status. As of December 2004, the IRS had issued eight million such numbers. . .

Dozens of small banks in such states like Ohio, Illinois, Iowa and Texas have recently started offering undocumented immigrants the opportunity to apply for home loans with an ITIN. Big banks, like Wells Fargo & Co. and Bank of America Corp., say they plan to launch their own programs within months. Don Cohen, a vice president at North Shore Bank in Milwaukee, which offers ITIN mortgages, says he has fielded inquiries from banks in Alabama, Minnesota, Mississippi, South Carolina and Washington, among others interested in serving undocumented immigrants.

Do I think these people are poor credit risks? Not at all. They are probably comparatively low credit risks. Immigrants work hard, invite relatives to join them, pool their incomes, and meet mortgage payments.

My point is this: the pool of qualified borrowers is shrinking.

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