Mortgages Issued to Illegal Immigrants Increasingly Common

When he came to Seattle from Los Angeles eight years ago, a married father of three young sons wanted to buy his family a home.

Nothing fancy. Just three bedrooms, in a neighborhood close to schools and with a yard big enough for the boys to romp about.

He’d landed a job in the construction industry that paid good money, and he had a tidy sum to put toward a down payment. But it’s what he didn’t have that worried him the most:

A legitimate Social Security number.

A credit file.

Legal immigration status.

“I was very honest with my Realtor from the start,” he said. “I told him I didn’t have a Social Security number and that I was undocumented. He said it wouldn’t be a problem.”

The issuing of home mortgages to illegal immigrants was rare in 1999 when he closed on a $144,000 home in Federal Way. But according to the Seattle Times, they’ve become more common as a still-small but growing number of brokers and mortgage lenders see potential in the nation’s burgeoning immigrant population.

That’s not to say the practice is widely accepted.

Many a mortgage lender won’t touch these loans, in part because illegal immigration is so controversial an issue in this country, even in the Seattle housing market. And in many cases, mortgage lenders who do make these loans charge higher interest rates.

The illegal-immigrant buyer from Federal Way, who asked that his name not be used because of the stigma associated with illegal immigration, applied for a Washington home mortgage through a national bank. Instead of a Social Security number, he used an individual taxpayer identification number — known as an ITIN — which the IRS issues to foreign nationals for paying taxes on money they earn in the U.S.

The man’s employer wrote him a letter of support, and instead of a credit score, his history of paying rent, utilities and other bills served as his credit history.

“Getting a loan should not be about immigration,” said Arturo Gonzalez, housing director for El Centro de la Raza, which operates perhaps the only community-based program in the state helping illegal immigrants buy homes.

“Do you work? Pay your bills? It’s not illegal for an undocumented immigrant to buy a house in this country.”

But the Federation for American Immigration Reform, a national group opposed to illegal immigration, believes financial institutions should not be making home mortgage loans to people here illegally.

Among the nation’s estimated 12 million illegals, many of whom build dream homes for U.S. families, are those who long for a home of their own. After years in the U.S., often paying taxes and often at the same jobs, a growing number are seeking ways to achieve the quintessential American dream.

In Seattle, El Centro de la Raza, which mainly serves Seattle-area Latinos, has worked with two small local lenders, Plaza Bank and Liberty Financial, to help illegal immigrants obtain mortgages. Since this spring, El Centro has closed a handful of mortgages, most for homes in King County.

“There’s huge demand for these kinds of loans,” said Jean Withers, Northwest regional director at Acorn Housing, a Chicago-based community organization that operates a program to help low- to moderate-income and illegal-immigrant households buy homes.

Acorn doesn’t offer such mortgages for illegal immigrants in Washington because its partner lender in the program has no presence here.

Latinos account for the largest proportion of the illegal immigrants in the U.S. Legal and illegal, Latinos are the nation’s fastest-growing ethnic group, increasing by about 1.7 million people a year. By the end of the decade, Latino purchasing power is expected to near $1 trillion a year.

“The Hispanic community places a high value on home ownership. It’s the center of hearth, home and family. They don’t take the responsibility of making mortgage payments lightly,” said Mary Mancera with the National Association of Hispanic Real Estate Professionals.

With all the controversy surrounding illegal immigration, lenders aren’t leaping in large numbers to offer these loans. The loans are complicated, and despite statistics that show low delinquency rates — lower than in the traditional market — some lenders see them as unproven and risky.

In some cases, borrowers pay for that risk with bad credit mortgage rates from legitimate lenders that can be one or two percent higher than prevailing market rates. But perhaps the biggest obstacle for lenders is the lack of a secondary market for loans to immigrants.

Housing finance companies Freddie Mac and Fannie Mae, which purchase home loans from lenders and repackage them for sale to investors, won’t touch mortgages to illegal immigrants, leaving lenders to hold and service them in-house, a strain on capital.