What Obama's Immigration Plan Means for Mortgage Lenders

President Obama's executive action to address immigration reform will most certainly be challenged by Congressional Republicans, but the move could spark broader efforts that may ultimately benefit the mortgage industry.

Specifically, giving roughly 5 million immigrants at least temporary relief from deportation could conceivably ease lenders' and borrowers' qualms about mortgages to undocumented workers who qualify with individual taxpayer identification numbers.

Following Obama's Thursday evening address outlining his plan, Housing and Urban Development Secretary Julian Castro issued a statement in support of the efforts. He called them "an important step toward fixing our broken immigration system."

That a cabinet member would toe the administration line on the president's immigration policies is not surprising. However, the statement does carry more weight coming from Castro, who is of Mexican ancestry and for five years served as mayor of his hometown of San Antonio, Texas - a city that boasts a 63.2% Hispanic population, according to Census Bureau data.

And while Castro's statement doesn't specifically address what effect Obama's actions would have on HUD's mission or the overall mortgage and housing markets, the immigrant population has recently garnered significant attention from the industry as a whole.

Recent research from Fannie Mae revealed that immigrants narrowed the homeownership gap at a faster rate during the 2000s than in the 1990s. The government sponsored enterprise's "Housing Insights" report released in August looked at how the housing crisis affected the gap in homeownership rates between the native-born and immigrant segments of the U.S. population.

The homeownership gap between the two segments was 14.7 percentage points in 2010, down from 18.5 in 2000. Census data show the native-born homeownership rate was 67.1% in 2010, down from 68.3% in 2000. That compares to an immigrant homeownership rate of 52.4% in 2010, up from 49.8% the previous decade.

That figure could, in theory, rise further due to the president's latest executive action. Obama's immigration reform will defer deportation for three years for people who came to the U.S. as children and for parents of children who are citizens or legal permanent residents. The changes wouldn't give these people, primarily from Mexico and Central America, an easier path to citizenship, according to Bloomberg.

Even before this immigration reform was announced, nearly 11 million undocumented immigrants were eligible to qualify for mortgages using an individual taxpayer identification number, which is assigned to them by the Internal Revenue Service for tax-filing purposes. However, very few lenders offered this product.

Citibank has been offering loans through ITIN numbers since 2004 in partnership with the Neighborhood Assistance Corp. of America, which helps low- and moderate-income borrowers get loans. Mark Rogers, a spokesman for Citi, said ITIN activity has fluctuated over time. Activity is "currently brisk," he said, and "represents a very small and specialized portion of Citi's mortgage lending."

However, Rogers said that the loans' performance is "somewhat better than our FHA loans."

Meanwhile, Venta Financial Group launched a program this summer that offers ITIN mortgages to undocumented immigrants in seven states: Nevada, Arizona, Florida, Georgia, Texas, California and Washington.

"At the end of the day, the folks that are immigrants are here for the American dream and are here not to be renters all their lives," said Jason Madiedo, president and chief executive officer of the Las Vegas lender. "Part of it is being able to educate and get this type of consumer out of the shadows." The solution is to educate them, and show them that "the opportunity for homeownership is real."

So far, Venta has only provided mortgages to five families. Undocumented immigrants are concerned that taking out a mortgage will raise awareness about their U.S. status, Madiedo said.

Now, presumably, there is no need to worry.

Republicans fear that the president is inviting even more immigrants to come to the country illegally, the Bloomberg article said. House Speaker John Boehner (R-Ohio) said Obama's actions have "deliberately sabotaged" any change of enacting the bipartisan revision he claims to seek.

"The House will in fact act," Boehner said at the Capitol, while declining to say how Republicans will fight Obama's plan.

Castro said House Republicans should "embrace the bipartisan support" of the immigration reform bill that the Senate passed last year.

Obama promised to deport undocumented immigrants who have been convicted of felonies, are members of gangs or pose national security risks.

"These are common sense ideas that will benefit 5 million individuals and their families, and have a long lasting and positive impact on our economy," Castro said in a Friday press release.

"These executive actions help secure our nation by strengthening our border, and prioritizing the deportation of felons, not families," he said.

— Additional reporting by Bloomberg News