Banks help undocumented migrants buy homes
The Arizona Republic
Jul. 24, 2005
Companies tap into new market

Yvette Armendariz
Undocumented immigrants now have a legal way of getting a home mortgage to buy into the American dream.

All they need is an individual taxpayer identification number issued by the Internal Revenue Service, a steady income for at least two years and a good credit rating.

Dozens of Valley immigrants already have been approved for these loans, often for up to $150,000. Their biggest challenge isn't proving a steady income, but rather finding an affordable existing home in the Valley, where the median value is teetering on $250,000.

At least two out-of-state banks are offering these mortgages in Phoenix's market. Others are likely to follow as they try to tap into an estimated $44 billion potential market, according to a recent report by the National Association of Hispanic Real Estate Professionals.

The availability of these mortgages illustrates the growing interest by companies to tap into the immigrant market, including the estimated 11 million who are undocumented, to grow sales, said Derene Allen, a senior vice president at Santiago Solutions Group's office in San Francisco. Despite the furor over illegal immigration, companies can't ignore the potential of growing loyal, lifelong customers, she said.

That's why grocery stores, clothing and furniture retailers, auto dealers and cellphone providers are making pitches in Spanish and hiring bilingual employees. But they also are stocking shelves with familiar food items from home, promoting in-store credit to folks who can't get traditional credit, translating menus and signs and opening accounts by accepting matricula consular cards, which are identification cards issued by the Mexican Consulate.

Banco Popular North America, based in New York, began offering the home loans about three months ago through a few mortgage brokers. Earlier this month, Alabama-based New South Federal Savings Bank's office in Mesa rolled out a similar program named La Ventana de Prosperida, the window of opportunity.

"It's a market that has wrongfully been ignored for a long time," said Chan Peterson, executive vice president and head of community banking for Banco Popular in Chicago. "There is a huge untapped reservoir of opportunity (with the immigrant market) here."

Only scattered opposition has been directed to some of these lenders, primarily from illegal-immigration critics. No federal or Arizona laws prohibit such mortgages.

But state Rep. Russell Pearce, R-Mesa, said he plans to introduce legislation to stop these mortgages.

"You've got to stop these rewards for people coming to this country illegally," he said.

Building wealth

The availability of loans is helping immigrants such as Emma and Sergio Zarate, who arrived in Arizona five years ago, build financial wealth.

The Zarates just began looking for a home after learning they could get a mortgage so long as they had an individual taxpayer identification number, which they received years ago to pay taxes.

"In renting, you can't save. You just pay,"' Emma said. "You don't receive anything."

Right now, they rent a one-bedroom apartment for $550 a month with Sergio's restaurant salary, but they hope to find a home for $140,000 to $170,000 that is big enough for their two young children to play, she said.

Jose Balderas, a chef who came to the Valley from Mexico eight years ago, also feels blessed that he can build a future.

"I came here with a plan to earn money to send back to (family in) Mexico," he said. "I never thought I would stay and buy a house. I just thought I'd save money to live a bit better."

But his family joined him, so it made sense to buy a home. He and his son combined their incomes to purchase a $170,000 home last month.

Big banks weigh risks

Larger banks are still on the sidelines. Wells Fargo, which has gone after business with new immigrants, is still examining the financial risks of making such loans. Others, such as JPMorgan Chase and Bank of America, are waiting to see if Fannie Mae and Freddie Mac will step up and buy these loans on the secondary market.

Another issue: finding mortgage insurance companies willing to write policies. That means buyers have to come up with 20 percent down or a bank assumes the additional risk of a lower down payment.

Wisconsin-based MGIC Investment Corp., a leading national mortgage insurance issuer, is thought to be the first company offering mortgage insurance on these loans. Michael Zimmerman, vice president of investor relations for MGIC, said the company began insuring these mortgages on a pilot basis about a year ago in response to demand. Still, these policies make up just $25 million of the $62 billion on the books for the 12-month period ending March 31.

Banks have no obligation to check immigration status, said David Barr, spokesman for the Federal Deposit Insurance Corp. in Washington, D.C.

"Why assume this person is not here legally?" he said.

But under the Patriot Act, consumers must have acceptable forms of identification to open an account. Allowable identification includes matricula cards.

Banco Popular's Peterson is unsure how many of the ITIN loans are to undocumented workers and how many are to immigrants with work visas who also don't have Social Security numbers.

He said his bank's product is aimed at immigrants who don't have a Social Security number.

IRS Commissioner Mark Everson told a House Ways and Means subcommittee last year that he is concerned the ITIN had become an acceptable form of identification similar to a Social Security number. However, he pointed out that the IRS has no authority to prevent others from using ITINs for non-tax purposes, nor does it enforce immigration laws.

Business dilemma

Companies marketing in Spanish to reach predominantly Spanish speakers don't bother Rusty Childress, owner of Childress Auto Mall and a co-author of the anti-illegal-immigration Proposition 200. The voter-approved measure is designed to combat voting fraud, particularly among undocumented immigrants, and save the state millions annually by denying benefits to people in the country illegally.

Although he advertises in Spanish, he thinks taking another step to go after business with undocumented workers in essence supports illegal immigration.

"The laws on the books say it's illegal to violate our federal immigration laws, (but) on the other hand both business and government look the other way once (immigrants) cross (the border)," Childress said.

Financial institutions started to tap into the undocumented-immigrant market a few years ago by opening checking and savings accounts using matricula cards and offering money-wiring services. A few community banks have gone a step further in offering loans and mortgages.

Chicanos Por La Causa Federal Credit Union in Phoenix, for example, offers signature and car loans with an ITIN rather than a Social Security number. Because there is no Social Security number for a credit check, the credit union looks at rent and utility payment histories.

The credit union is looking to offer a home-equity line using ITINs in the fall, said Miguel Avila, chief executive officer of CPLC credit union. He expects more financial institutions to follow with similar loans.

"They see the kind of money they can make," said Avila, who estimates about 25 to 30 percent of the credit union's loan portfolio used ITINs.

Step toward acculturation

Peterson said Banco Popular has been making the mortgage loans to immigrants in Texas for about seven years with no hitches. Most are loans of $80,000 to $130,000. He estimates the Arizona portfolio is valued at $2 million to $3 million.

"They perform as well as other loans," he said. "To this particular borrower, a house is a huge accomplishment in acculturation. . . . They hold the home pretty dear."

New South Federal's Arizona office referred calls about its program to the Alabama office, which did not return calls.

The bank, whose program initially was called Casa Mia, told BusinessWeek that it had received negative calls and e-mail about its 20-year mortgage product aimed at immigrants.

Jim McGuire, president of AmeriCasa Mortgage, is concerned about similar negatives. His company has brokered about 10 ITIN loans through Banco Popular.

"We might be putting ourselves in the bull's eye of the anti-immigration folks, but AmeriCasa is committed to helping this underserved market," he said. "By bringing new immigrants into the credit system, we could create a huge economic boom for Arizona."

The loans aimed at immigrants generally don't include mortgage insurance costs and tend to charge a slightly higher interest rate than market because of the added risk involved, said Rogelio Inzunza, manager of CPLC Mortgage, which has brokered about 30 of these ITIN home loans through Banco Popular. But that isn't a deal killer because the rate can be as low as 7.25 percent, he said. These loans also call for at least a 5 percent down payment and closing costs. But that's usually not a problem, either.

"Everyone has their mattress money," Inzunza said. "Finding a home is the problem."

Most applicants are qualifying for homes under $150,000. But the median price for a resale home in the Valley is now just shy of $250,000.

Instability a worry

Immigration attorney Marshall Whitehead sees these loans as helping credit-worthy immigrants. But he also worries about the potential for problems.

"If you were in the lending business, would you feel fairly secure about lending to people whose future in this country is unstable?" Whitehead asked. One possibility is defaults on loans. Another is unscrupulous lenders coming in, seeking a hot real estate market and hoping undocumented buyers can't make the payments so that the lenders then can flip the homes for a nice profit, he said. Whitehead said if lenders really wanted to make a go of this market, they would be vocally supporting a guest-worker program. With permits for work in the United States, that would lessen the risk of the worker losing the home because he or she was deported and defaulted on the payments.

"We're talking about a huge segment of the market that has previously been untapped," he said.

But the ability to buy a home is nothing new for undocumented immigrants, nor has been the possibility of getting ripped off, said Edmundo Hidalgo, chief operating officer of Chicanos Por La Causa.

For years, immigrants have bought homes via contracts to purchase, which also are known as contracts for deed or carrybacks. In essence, the seller is willing to finance the home and doesn't generally give title to the buyer before the loan is paid off.

The option, however, has long been a gamble for the buyer, who risks not getting the title once it is paid off.

"At times the seller is not on the up and up," Hidalgo said.

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