Mortgages for illegal immigrants

Bank of America kicked up a stink when it came to light several months ago that it had been quietly testing a credit card in California that didn’t require an applicant to possess a Social Security number, which was tacit acknowledgement that BofA was marketing the card to illegal immigrants. Now comes a story in The Charlotte Observer that a number of banks (not including BofA, however) are experimenting with mortgages in which the lenders accept Individual Taxpayer Identification Numbers on loan applications in lieu of Social Security numbers. The Observer notes that the IRS issues so-called “ITINs” solely to process tax payments, regardless of immigration status.

These mortgages are starting to take off. The National Association of Hispanic Real Estate Professionals believes that the ITIN mortgage market could reach $80 million, and already Wall Street has begun to buy ITIN loans and bundle them into mortgage-backed securities for sale to pension funds and other institutional investors.

Not surprisingly, the critics are already out, calling for an end to mortage financing for illegal workers. According to the Observer:

Critics, however, insist banks should accept only verified documents that can be obtained by U.S. citizens and legal residents. William Gheen, head of Raleigh-based Americans for Legal Immigration PAC, earlier this year launched a boycott against Bank of America over its credit card program."It's against federal law to induce an illegal alien to enter the U.S. and aid and abet them staying in the country," he said.

In the last session of Congress, a Republican congresswoman from Banner Elk, Rep. Virginia Foxx, introduced a bill that would require federal agencies that insure mortgage loans to check Social Security numbers of applicants. Foxx's spokesman said she opposes the use of ITINs for loans and plans to bring the bill back up again.

I tend to side with the pro-immigrant experts like Tim Ready at the University of Notre Dame, who argues that "It's really important to the economy as a whole and to the real estate market in particular that Latinos be able to purchase a home." You can't have individuals mow your lawns, bus your tables at a restaurant, clean your houses, and not allow them the chance to own their slice of the American dream. Besides, the housing market needs all the help it can get these days.

My BusinessWeek colleague Brian Grow authored a really insightful cover story ("Embracing Illegals," July 18, 2005) on the conflict between government--who by law must deport illegal workers--and Corporate America, which in their quest for growth, has aggressively been marketing to undocumented workers in recent years (not to mention employing them, but that's another story). You can read Brian's story here.

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