Undocumented residents being recruited for loans
Home-buying program has cash, controversy
By Janine Zúñiga San Diego Union February 6, 2006 signonsandiego.com
A major U.S. bank has funded its first home loans to undocumented Mexican immigrants in San Diego County in a move that targets a lucrative, wide-open market while providing new grist for the debate over illegal immigration. The local program, which uses tax identification numbers instead of Social Security numbers, is similar to programs run by small lenders – and two state agencies – around the country that have distributed millions of dollars to undocumented immigrants over the past few years. “There is a huge untapped market out there, but it is a controversial program,” said Sarah Lumbert, office director of San Diego's ACORN Housing Corp., part of a national group working with Citibank to provide tax-ID loans. ACORN members, advocates on housing issues for low-and moderate-income people and Citibank have quietly recruited applicants in the county for more than a year. Their program has ramped up slowly because applicants need to establish credit and hunt for an affordable home.
But the market is vast and the level of interest in the program is high, especially since the loans typically offer below-market interest rates, down-payment assistance and require no mortgage insurance. The Pew Hispanic Center estimated that 10.3 million undocumented immigrants were living in the United States as of March 2004. And a study that year for the San Diego-based National Association of Hispanic Real Estate Professionals concluded that nearly 216,000 undocumented immigrants could become homeowners if they had better access to the home-buying process, collectively acquiring an estimated $44 billion in mortgages.
Although there are no reliable estimates of the number of undocumented residents in San Diego County, Latinos make up 29 percent of the population, according to the U.S. Census Bureau. In South County, that figure is 54 percent. About one-quarter of homes in South County are owned by Latinos, according to 2000 census figures. Only two tax-ID mortgages have been processed locally, but about 10 local Citibank loans to undocumented immigrants may soon be finalized with the help of ACORN, the Association of Community Organizations for Reform Now. The nonprofit organization receives much of its funding from the Department of Housing and Urban Development. Tax-ID numbers are used by those who need to report federal taxes but are not eligible for a Social Security number, usually because they are undocumented. Until the past few years, lenders would not – and most still do not – accept anything but a Social Security number for home loans. Wells Fargo recently seized on the market, joining Citibank as the only nationwide banks offering tax-ID loans. Wells Fargo started its pilot tax-ID loan program in Los Angeles and Orange counties in December. Chuck Lemoine, a Wells Fargo senior vice president, said providing tax-ID loans is legal and that reaching out “is not only the right thing to do, it's good business.”
Estela, the first to secure a local loan, is a house cleaner from Mexico City. She has lived, worked and paid taxes in San Diego County for 13 years but has no legal right to be here. However, Estela does have a tax-ID number. ACORN Housing officials disclosed her identity to The San Diego Union-Tribune on the condition her full name not be used. Six years ago, Estela asked an American friend to help her buy a home. She paid the costs, his name was on the loan and title. But a tax lien frightened her friend, who transferred the title to Estela. When the mortgage company found out she was an illegal immigrant, it demanded full payment. Estela thought she would have to sell her three-bedroom home or lose it. That is, until she heard about the tax-ID loan program. In October, Estela signed the final documents for a new mortgage issued by Citibank. The local tax-ID program has kept a low profile – no Citibank or ACORN-issued news releases – because of the anti-immigrant backlash that the overall program has drawn.
Citibank has processed 72 tax-ID loans nationally since October 2004, half in California. ACORN officials sponsor weekly workshops at their City Heights office. Their counselors knock on doors promoting the program. “A lot of people think they can't apply. So we've done a lot of outreach,” Lumbert said. “The people in the program so far have been very persistent about getting things done.” Often, family members pool resources to afford the county's pricey market. With Citibank, as many as eight people can sign for a mortgage. As passionate as real estate professionals are about the program, critics are just as passionate in attacking it.
“We're seriously looking at getting these banks charged with aiding and abetting someone who's a criminal,” said William Gheen, president of the national group Americans for Legal Immigration. “Illegal aliens are criminals.” Gheen says the program encourages illegal immigration. And Americans, he argues, are losing loans to undocumented immigrants. “It's highly offensive to our legal citizens who have to jump through hoops with their credit files to get home loans and they're giving loans to people who have no credit whatsoever,” Gheen said. Rob Paral, a research fellow with the Immigration Policy Center of the American Immigration Law Foundation, a Washington, D.C.-based nonprofit, prepared the 2004 loan study for the Hispanic real estate group. He said critics might legitimately say that banks with tax-ID programs are condoning illegal immigration but doesn't believe legal residents are losing loans. “There is no displacement of credit from natives to immigrants,” Paral said. “Banks have plenty of money to loan.” Some fault the federal government for sending inconsistent messages. On one hand, they say, the government is trying to step up measures to curb illegal immigration. The U.S. House of Representatives passed legislation in December to build 700 miles of fencing along the U.S.-Mexico border. The same measure would require mandatory detention of illegal immigrants and increase penalties for employers who hire them. The legislation was referred to a Senate committee in January.
On the other hand, there has been no movement by Washington lawmakers to put a stop to the tax-ID loans, and the government routinely issues tax-ID numbers. The IRS has issued such numbers since 1996 to foreigners to encourage them, regardless of their immigration status, to file tax returns. There is nothing illegal about the loans. Congress has passed a series of fair-lending acts, similar to the 1977 Community Reinvestment Act, that ensure equal access to mortgages for low-income and minority households. The law does not require banks to check immigration status, Federal Deposit Insurance Corp. spokesman David Barr said. “We don't encourage banks to reach out to undocumented immigrants,” he said.
“But through the Community Reinvestment Act, they must reach out to minority groups, and a large part of that group is the Hispanic population and many are new arrivals to this country.” Citibank and ACORN Housing offer the program in Miami; New York City; Jersey City, N.J.; Baltimore; Washington, D.C.; Chicago; Bridgeport, Conn., and at all of ACORN Housing's 12 California offices. Smaller lenders have taken the lead with the loans in at least nine states. Housing agencies in two states also have taken part, prompting backlashes there. The Wisconsin Housing and Economic Development Authority has issued 242 tax-ID loans worth $27 million since March 2004. That spurred two measures, pending in the Wisconsin Senate and Assembly, that would prohibit the housing authority from funding home mortgages without Social Security numbers. A similar state-backed program in Illinois was announced in December. Critics plan to introduce legislation to stop it.
On a Saturday morning last fall, about a dozen people attended a Spanish-language, first-time home-buyers class at ACORN's local office. Organizers told participants many banks are willing to work with applicants who have little or no credit. Many will accept nontraditional records of credit, such as utility payments and documentation of private loan payments. Applicants are told to put their cash in a bank account. Lumbert of the San Diego ACORN office said it is common for immigrants – many of whom bring a distrust of banks from their home countries – to keep hundreds, if not thousands, of dollars at home. Lumbert said one man had a bank statement showing a few thousand dollars, but he said he had more at home. When she asked how much, he said $40,000. Many undocumented immigrants have been in the United States for years, even decades. Most live with family members who are legally in the United States. “There are many undocumented immigrants who are pretty well-integrated into American society, who have lived here a long time and have a decent income,” said Paral, who conducted the 2004 loan study. Estela is one of them. Her story is common among undocumented immigrants who buy homes: They buy property with someone who has documents or use fake Social Security numbers and names. Estela, a divorced mother of two, has worked since 1992 as a house cleaner in Del Mar and, later, in Rancho Santa Fe. Six years ago, her American friend used $24,000 of Estela's money to buy a South County home. In July, a $12,000 lien was placed on the home because of unpaid back property taxes. The friend transferred the title to Estela. At the time, the mortgage had a balance of $140,000.
Estela acknowledges not paying tax bills for two years, saying she didn't receive them. When Countrywide Home Loans found out about the title change, it offered to give Estela a loan but it required a Social Security number. Estela had 75 days to come up with $152,000, the loan balance plus the back taxes. After frantic calls for help, Estela found ACORN Housing. She received a 30-year fixed mortgage at 5 percent interest, 1 percentage point lower than the standard rate. It costs $780 a month. Estela's home was appraised at $565,000. Paral said lenders that provide loans to undocumented immigrants are taking a risk, considering the threat that leaseholders might be deported. Additionally, banks can't sell the loans on the secondary market to Fannie Mae or Freddie Mac, as they can other loans, because the two mortgage companies only handle loans for legal residents and U.S. citizens. Anecdotal evidence suggests the loans so far have been successful, Paral said. The owner of a small savings and loan in Chicago told him his tax-ID loans are his safest. “It's emotional,” Paral said. “When you're coming from a place where banks don't lend money and you are given the opportunity, you safeguard it and respect it.” Estela's 26-year-old son, who has a two-year biotechnology degree from a community college and works as a waiter, said the family moved from Mexico to San Diego County 16 years ago. His sister is now in her third year of law school in Northern California. He can't believe they own a home.
“Like I was telling my mom, some people come here and abuse the system,” he said. “My mom never applied for welfare or anything. She's worked and paid taxes. I think people who don't get in any trouble should be given an opportunity to own a home. I'm just glad we found someone to give us that opportunity.” Union-Tribune library researcher Danielle Cervantes contributed to this report. |
