As Washington signals a more lenient immigration policy toward the nation's eight million to 11 million undocumented aliens, U.S. banks like Fifth Third, North Shore Bank and Second Federal Savings & Loan, are quietly courting this group for home mortgages.
"Banks are not an arm of the immigration department," says Kevin Mukri, a spokesperson for the Office of the Comptroller of the Currency, the primary bank regulator. "As long as those getting mortgages meet the requirements of being authorized bank customers, including proper ID, it would be discriminatory not to service them." There is no law against banks issuing mortgages to illegal immigrants, nor against their owning property in the U.S.
An estimated six million to eight million of those undocumented are Latinos, who alone represent a potential $44 billion market in homes, according to the National Association of Hispanic Real Estate Professionals.
The Federal Deposit Insurance Corp. and the Mortgage Guaranty Insurance Corp., a Milwaukee-based mortgage insurer, recently gave their blessing to a product aimed at this group, the ITIN mortgage. An acronym for the Income Tax Identification Number, the ITIN mortgage is marketed to those with the nine-digit Internal Revenue Service number. Working illegal immigrants seek an ITIN number for tax-paying purposes because they aren't eligible for a Social Security number. Both resident and nonresident aliens may have ITIN numbers. Michael Frias, an FDIC spokesman, confirms that banks aren't legally required to verify legal status. "There is no federal banking law that requires banks to verify the immigration status of foreign account holders," he says.
Don Cohen, vp of community lending for North Shore Bank of Brookfield, WI, has been offering ITIN mortgages since September. "This is a whole new market," he says. "Immigrants are hard working, earn income, have down-payment money and want to own a home." If an illegal alien is deported and defaults on his mortgage, the bank would own the home.
Last autumn, the MGIC began working with 35 lenders to offer mortgage insurance for ITIN mortgages, an endorsement that cuts the loans' interest rates, and to date it has insured 196 loans worth more than $25 million. "We recognize the reality of a standing immigrant population," says Ryan Daniels, a spokesman for MGIC. He acknowledges that many in this target audience may be undocumented, but underwriting standards only require that applicants have an ITIN number and have paid taxes for at least two years. Not one of its 196 loans has been delinquent, he says.
The growth of ITIN mortgage programs shows how banks have adapted to the economic reality of illegal immigrants, many of whom aren't deported by the Immigration and Naturalization Service unless they commit violent crimes. Although it's illegal to hire them, few employers are prosecuted, and the IRS accepts their tax payments. Moreover, many households with an undocumented immigrant also may include a legal permanent resident or U.S. citizen, frequently a child born here. "Anything that accommodates their illegal presence encourages them to stay and others to come," warns Jack Martin, special projects director for the Federation for American Immigration Reform in Washington, D.C.
For the most part, however, banks are staying out of the political fray, and concentrating on business strategy. Second Federal Savings & Loan, based in the Chicago area, has offered ITIN mortgages for several years, but has renewed its focus in the last 18 months. "With margins narrowing, we got squeezed," says president and CEO Mark Doyle. "We looked at our alternatives. One glaring opportunity was in the ITIN market." It proved to be a solid bet: Today, the bank's $70 million ITIN portfolio is "performing well" with no foreclosures, he says, though he declined to provide profit figures.
Doyle says illegal immigrants have proven to be no bigger risk than legal immigrants or U.S. citizens. North Shore Bank's Cohen concurs, saying, "The risk has been minimal to non-existent."
In November, Cincinnati-based Fifth Third Bancorp introduced an ITIN mortgage in seven markets, drawing twice the number of expected candidates. Says Bill Schumer, vp of product development, "This is a great outlet to help Hispanics establish roots here." Other financial institutions offering the mortgages include Banco Popular in Houston; Self-Help Credit Union in Durham, NC; First Bank of the Americas in Chicago; Texas Bank in Fort Worth, TX; and Mitchell Bank of Milwaukee.
