A member of Iowa’s state legislature last week introduced a bill prohibiting mortgage loans to borrowers who are not U.S. citizens or permanent residents under federal law.
Iowa House File 2446, introduced by Rep. Bill Dix, R-Shell Rock, provides that “a mortgage banker or mortgage broker…or other mortgagee…shall refuse to provide certain mortgage loans to a person who is not either a citizen of the United States or a lawful permanent resident under the federal Immigration and Nationality Act.”
On the national front, a bill, H.R. 2043, that would, among other things, amend the Truth in Lending Act to prohibit residential mortgages for so-called “illegal aliens,” is under consideration in the U.S. House of Representatives.
As the real estate market slows, some industry observers have said the growing immigrant population, along with Baby Boomers, women-run households and the second-home market, will continue to drive the strength of real estate in 2006.
The home-ownership rate for people in this country age 35 to 44 born outside the U.S. to parents without U.S. citizenship was 52 percent in 2004, according to a study by the Center for Housing Studies of Harvard University.
“Current law does not require lenders to determine citizenship before providing financing for a home loan,” Dix said in a statement on his Web site.
Though it may not currently be legally mandated that a mortgagee must determine a loan applicant’s citizenship status before providing financing, a loan broker said it is accepted practice to do so.
Mitch Grashin, a California loan broker with 20 years’ experience, said, “When you fill out an application for a mortgage loan, you have to state whether you are a citizen. The loan application asks, ‘Are you a U.S. citizen? Yes or No.'”
According to Grashin, in practical terms, Dix’s bill may not be necessary.
If an applicant for a mortgage loan is not a citizen, he said, “in about 90 percent of the loan programs out there, you have to have a green card to purchase a house, and usually it has to have more than a year left before it expires.”
A “green card” is proof that the bearer has official immigration status (lawful permanent residency) in the United States, an immigration attorney confirmed.
“Banks can accept the Individual Tax Identification Number (ITIN) from the Internal Revenue Service in lieu of a Social Security card,” Dix said on his Web site.
A representative of the Federation for American Immigration Reform said some banks, including Citibank, are using ITIN numbers to make loans to immigrants who do not have lawful permanent residency status.
“The banks accept them without a Social Security number and also accept utility receipts and other things as some measure of creditworthiness,” said Paul Egan, director of government relations for FAIR.
“Immigration status does not preclude a borrower from obtaining credit under generally accepted U.S. banking practices,” said Janis Tarter, a Citibank spokeswoman, in response to Egan’s comment.
Because he hadn’t read the legislation, Egan said he could not comment directly on Dix’s bill. Speaking in general terms, the government relations director said he had no problem with mortgage loans to immigrants with green cards.
However, loans to those without permanent residency status are another matter, he said.
I can tell you as a matter of principle it’s not a good idea to make mortgage money available to individuals who can be deported at any time,” said Egan. “Who would be holding the bag if the federal government did enforce the laws against illegal immigration? It would approach the enormity of the savings-and-loan collapse of the 1980s.”
Egan said a number of states, including Illinois, have programs making mortgage loans available to immigrants who do not have lawful permanent residency status. “You have to understand we have a resident population of aliens that ranges between 11 and 13 million,” the government relations director said.
“Jobs are the number one attraction, but there are also a number of incentives for coming to this country illegally. Making mortgages available to these people is a very powerful incentive to people from poorer countries,” Egan said.
Determining a person’s immigration status is tricky and mortgage professionals should not be charged with that responsibility, Carl Shusterman, a Los Angeles immigration attorney, said.
“I have been doing this for 30 years and it is complicated. The idea that every real estate professional is going to be able to look at papers and be able to determine immigration status is going to make for chaos in the housing market,” Shusterman said.
“For example, I just got off the phone with someone who has been in the U.S. for 20 years on a temporary immigration status, a treaty investor. As long as he maintains his business he can remain in the country the rest of his life. Is there some government interest in depriving such a person of the ability to buy a home?” Shusterman said.
In addition, it can take a long time for a person to win permanent status, according to Shusterman, depending on individual circumstances.
“It seems to me the last thing we would want to do legislatively is impede the market,” said Janis Bowdler, a housing policy analyst withNational Council of La Raza in Washington, D.C. “It seems counterintuitive to artificially stifle the market.”
Like Egan, Bowdler said she had not seen the legislation and could not comment directly on it, but did say, “It’s not really the job of financial institutions, mortgage brokers or real estate agents to enforce U.S. citizenship. What kinds of burdens are we putting on the financial industry?”
According to Bowdler, “We want the flexibility to better serve underserved communities and the last thing we want to do is tell the market, ‘You can’t serve this kind of person.'”
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