Banks
help undocumented migrants buy homes
Companies tap into new market
Yvette Armendariz
The Arizona Republic
Jul. 24, 2005 12:00 AM
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.
Reach the reporter at yvette.armendariz@arizonarepublic.com
or (602) 444-4842.
