Eighteen years later, Hugo still doesn’t have legal immigration status, but that hasn’t stopped him from securing the trappings of the American middle class: a steady job, a wife, three kids, a dog, and—as of this summer—a home to call his own.
Despite heightened tensions around immigration and revived calls for deportation, there’s been a quiet resurgence of lending to undocumented immigrants who want to put down roots here. Hugo*, 37, is among those who are now homeowners, thanks to a type of loan that’s available to borrowers without legal immigration status.
Hugo is proud of the life he’s built here. “I started washing dishes—now I run the place,” he said recently at the Durham restaurant that he manages, black apron tied around his waist, black baseball cap on his head. He worries that American meritocracy is on the wane. (“They celebrate even graduating kindergarten, when they didn’t do a damn thing.”) His daughter and older son attend one of Durham’s best magnet schools.
But it’s only thanks to a certain kind of mortgage that Hugo was able to become the owner of a three-bedroom home in north Durham, which he bought for $138,000 in late May with the help of a 30-year mortgage from the Self-Help Credit Union.
To take out the loan, he used an Individual Taxpayer Identification Number (ITIN), which the IRS issues to foreign nationals without Social Security numbers for tax-filing purposes, whether or not they are legally present. Not all ITIN mortgages go to undocumented immigrants, but they may be able to qualify for such loans, so long as the lender doesn’t require verification of legal status or otherwise screen them out.
“People have the right to fulfill their dreams,” said Luis Pastor, CEO of the Latino Community Credit Union, a lender in North Carolina that offers mortgages to immigrants irrespective of their immigration status.
Homeownership, he continued, “is the most natural process to create wealth for anybody. Why would they not be dreaming to do the same?”
Access to such mortgages remains limited: For the most part, the lenders are small, community-based banks and credit unions that are already immigrant-friendly. As the housing market has started to rebound, however, new lenders have begun extending financial services to a community they believe is underserved—and represents an untapped business opportunity as well.
The Las Vegas-based Venta Financial Group launched a new ITIN mortgage product this summer that’s now available in seven states: Florida, Georgia, Texas, California, Washington, Nevada, and Arizona. The company is now one of the few offering mortgages to undocumented immigrants in states spanning the country, suggesting the comeback of a market that was just beginning to emerge before the financial crisis.
Wells Fargo may be getting in the market, too. “Wells Fargo currently requires a Social Security number for all home loan applicants. We are determining whether to accept ITINs in lieu of SSNs in the future,” according to a spokesperson for the bank’s home mortgage division. Asked whether it would require legal status in the U.S. if it offered ITIN loans, the bank said that it “could not speculate further.”
In his experience, undocumented homeowners “do everything in their power to pay their mortgages,” said Venta Financial’s president Jason Madiedo, who is the son of Colombian immigrants. “If they’re out of a job, they figure out how to generate income.”
For Hugo, owning a home sets him apart from other immigrants in the area who’ve been either unable or unwilling to settle down in America—still separated from their spouses and children, with thoughts of their home countries still tugging at them. “I don’t want to be them,” he said. “I don’t want to go back.”
He heard there were jobs in Durham, so that’s how Hugo first ended up living on West Trinity Avenue.
There’s always a steady hum of activity, even on a languid summer afternoon: Men fixing their cars with the stereo on; friends catching up on folding chairs outside, enjoying their one day off from the restaurant; kids kicking around a soccer ball in the back field. Better, for sure, than La Maldita Vecindad—literally, “the Neighborhood of the Damned,” where single men from Mexico often land when they first arrive in the city.
These days, Hugo is glad that he can finally afford some silence. “It’s so quiet and so private,” he said of his new neighborhood.
His new house sits near a cul-de-sac in north Durham, on a residential street dotted with lawns and basketball hoops. His three kids—14, 11, and 5 years old—can play in their own backyard. There’s more than enough room for the family’s German Shepard to run around.
Hugo isn’t wealthy. His wife cleans houses a few times a week to help make ends meet. He still regrets sinking money into that timeshare in Florida, where he got behind on payments. But his $37,000 salary at the restaurant sets his income above newer arrivals toiling for the minimum wage, or less.
“When I started washing dishes, I knew that wasn’t me,” he said. To ensure that he learned English quickly, he refused to let his first boss speak to him in Spanish and switched off the telenovelas at home.
That was in the mid-1990s, when Hispanic immigrants first started flocking to the Raleigh-Durham area, attracted by an economic revival that brought new life and jobs to the area. Research and tech industries have fueled the region’s growth, but the scores of new construction projects and restaurants have also relied heavily on new immigrants, many of them undocumented.
As the area’s immigrant community has become more established, the promise of homeownership has started beckoning to them, too. Nationally, 35% of undocumented immigrants are homeowners, according to a 2009 study from the Pew Hispanic Center. Of those who’ve lived in the U.S. for a decade or more, 45% own their homes.
“We had been saving—you gotta have something,” said Hugo. “If you don’t have dreams or aspirations, you’re dead.”
Juan*, 35, is another undocumented homeowner who spent two years building up a nest egg in hopes of taking out an ITIN loan.
Originally from Guatemala, he’s been doing construction work in the Raleigh-Durham area since 2000. With growing children—an 11-year-old boy and a 7-year-old girl—he wanted to move his family out of their cramped apartment on the edge of Duke’s campus, which had just two bedrooms and a kitchenette.
He makes less than $30,000 a year doing drywall construction, and his wife stays at home with the kids. But once the couple resolved to buy a home, they started putting aside about $400 a month to save for a down payment—nearly 20% of Juan’s paycheck.
They also worked with a financial counselor to build up their credit history, paying off old bills and paying new ones on time. Juan constantly checked the balance on his phone to see how much his savings account had grown, hoping they could avoid having to ask their relatives for help.
Two years later, they had $9,000—just enough to cover the down payment for the $90,000 three-bedroom they had been eyeing. “I had a Plan B in case—but we were very happy because we didn’t have to borrow [from relatives],” said Juan, who got the ITIN mortgage through the Latino Community Credit Union.
In April, Juan and his family moved into their new home in Durham, where their $760 monthly mortgage payment is barely higher than the rent for their old apartment. “La Cabinita,” his church friends call it, because it looks small from the outside but feels as cozy as a log cabin when you walk in.
“A lot of people have wondered, and asked me, ‘How did you do it?’ I told them, ‘You need to find out for yourself,’” he said.
Two of Juan’s friends have made appointments with loan officers since then.
New migrants tend to be wary of traditional banks, particularly if they’re undocumented. About 22% of foreign-born residents without citizenship and 20% of Hispanics are unbanked, according to a 2011 study from the FDIC. But keeping cash on hand also turns them into walking targets.
As Durham’s Latino immigrant population grew, there was a spate of robberies, muggings, and other crimes against the new arrivals, some of them deadly. Immigrants also tend to be also easy prey for financial scams and predatory lenders. Given the lack of financial access, they’ve also resorted to less-than-desirable means to become homeowners: Having other people buy homes on their behalf, falsifying Social Security numbers to get conventional loans, turning to high-interest hard money loans, or saving up for all-cash sales.
Such factors eventually prompted the opening of the Latino Community Credit Union in 2000. Three years later, immigrant-friendly lenders got a big boost from the federal government to extend their services to the undocumented community: In 2003, Bush’s Treasury Department issued a new rule allowing customers to set up bank accounts with ITINs if they lack Social Security numbers.Small local banks and credit unions were among the first to get on board with ITIN loans and mortgages for the undocumented, which initially took off in Illinois and Wisconsin. As demand for the new products grew—and immigration reform seemed to be on the horizon in Washington—bigger lenders started dipping a toe in, too.
In 2004, Citigroup began issuing ITIN mortgages in partnership with the now-defunct Association of Community Organizations for Reform Now (ACORN); Wells Fargo launched a pilot ITIN mortgage program in California soon thereafter. Expecting that a path to citizenship might soon become a reality, some community advocates ”were actually touting homeownership as something immigrants could do to actually demonstrate moral character,” recalled Aracely Panameño, director of Latino affairs at the Center for Responsible Lending.
The movement wasn’t without controversy: Bills banning loans to the undocumented and anti-immigration campaigns against the products cropped up as the market grew. In 2005, Wisconsin legislators killed a state program that supported the loans.
“The problem here is that mortgage lending to people using ITINs—who are by definition illegal aliens—is a normalization of their status,” said Mark Krikorian, executive director of the Center for Immigration Studies, who opposes the loans. “It’s not an amnesty, but it’s a recognition of their status as legitimate. That’s simply contrary to the whole concept of immigration law enforcement.”
Ultimately, it was the financial crisis that prompted ITIN lending to collapse, just as the market was beginning to take off. More than five years later, it still hasn’t fully recovered: Most big banks have remained on the sidelines, and lenders remain reluctant to extend loans to lower-income borrowers across the board. Those that do offer mortgages to the undocumented can’t resell easily them to create more liquidity in the market, as Fannie Mae and Freddie Mac will only buy loans held by lawfully present borrowers. Then there are the political risks of embracing undocumented customers at a time when more lawmakers are talking about deporting immigrants than legalizing them.
So even in high-immigration states, only a few community-based and niche lenders typically offer ITIN loans that don’t require verification of immigration status. Citigroup is currently the only major national bank making the loans, and it’s on the very margins of the market. The banking giant funds a mortgage program in partnership with the Neighborhood Assistance Corporation of America (NACA) that allows applicants to use ITINs, but “these represent only a small portion of the overall loan volumes we finance for NACA,” said Mark Rodgers, director of Citi Public Affairs. (Asked for the total number of ITIN loans made, Citi referred msnbc to NACA, which did not respond to multiple requests for comment.)
But many familiar with the market believe that the economic case for catering to ITIN borrowers and other underserved communities will only grow stronger as the recovery gains steam.
After the housing bust, “there was really kind of a pause on any kind of adventureness from a lot of lenders,” said Brian Nguyen, sales manager for New American Funding in California, referring to ITIN loans and other niche products. “Now lenders are getting very comfortable with what’s possible and what isn’t—basically where the line is and where they can toe it.”
Some ITIN lenders say their mission goes beyond their own bottom line, and they’re unabashed in their support of the undocumented community; others insist it’s a financial decision without a pro-immigration agenda. But all are likely to argue that the loans are a smart investment. Durham’s Latino Community Credit Union estimates that mortgage lending to all borrowers has increased 25% a year for the last three years. (The lender doesn’t classify its ITIN mortgages separately from those with Social Security numbers in its record-keeping “out of concern for members’ privacy,” according to spokeswoman Silvia Rincon.)
ITIN lenders insist that the loans consistently perform well, despite the fact that undocumented borrowers tend to be lower- or moderate-income workers who lack a traditional credit history. The delinquency rate on all the Latino Community Credit Union’s mortgages has been about 1.8%, and the credit union says that undocumented homeowners are even better at making their payments on time. “ITIN loans perform better than loans with Social Security numbers,” said Pastor.
Guadalupe Credit Union in New Mexico has found the same with its ITIN borrowers: They have a 1.24% delinquency rate on average, compared to 1.88% for its overall loan portfolio, according to Brenda Dominguez, the credit union’s CFO, who says demand for ITIN loans has been growing. In the early months of the housing crisis, one independent analysis found that ITIN loans had a lower average delinquency rate than both subprime and conventional prime loans, according to the Wall Street Journal. “Even through 2007 and 2009, the performance on ITIN loans were outperforming the market, they were stellar, when everything was crashing around them,” said Madiedo.
Lenders say it’s because ITIN borrowers tend to undergo careful scrutiny and tough underwriting standards before they’re approved for a loan, unlike many subprime borrowers in the lead-up to the housing bust. Since the ITIN loans typically stay on their own books, lenders say they try to follow up quickly when a borrower is at risk of falling behind.
Proponents also believe their undocumented customers will go out of their way to pay the loans back.
“The fact these folks want to buy homes and want to dig roots in this country is a positive one overall. They have a commitment to this country and be a productive part of this society,” said Gary Acosta, CEO of the National Association of Hispanic Real Estate Professionals. “They believe in this country in some ways more than folks that were born here.”
The last time he was in the ITIN mortgage business, Madiedo remembers getting a panicked call from one undocumented homeowner in Nevada who was detained around 2004 and ultimately deported. But even being kicked out the country didn’t stop the couple from making their payments on time, he said: The borrower’s family and friends banded together to make sure the loan got repaid.
“They were never late on their mortgage even after that,” Madiedo said.
Such anecdotes can’t hide the fact that there are different risks involved when lending to borrowers who could be detained, deported, or thrown out of work because of their immigration status, and whose legal status may be constraining them from finding better-paying jobs. Chicago’s Second Federal Bank, a pioneering ITIN mortgage lender, failed in 2012 in part because it was making large volumes of such loans, according to an audit from the Treasury Department’s Inspector General. Some lenders have even questioned whether lending to the undocumented might subject them to scrutiny by federal immigration authorities.
The risk factors and limited options often mean higher borrowing costs for the undocumented. The average 30-year fixed rate on Zillow, a popular real-estate site, is currently 4.08%. By comparison, Hugo pays 6.25% interest on a 30-year fixed-rate mortgage; the Latino Community Credit Union offers 20-year fixed-rate mortgages in the 6.25% to 6.75% range; and Venta Financial offers loans in the mid-7% range with a 30% down payment.
“I do get a lot of calls on this type of loan. I would have to say probably 96 out of 100 of those calls, they don’t go anywhere. The reason is because most of the investors willing to put this together are going to require 30 to 35% down, and that’s a lot of money,” said Nguyen.
The terms are generally better than the predatory subprime loans that fueled the housing crisis, though questionable ITIN loans were also made at the time. But Hugo is frustrated that he can’t refinance his loan for a lower interest rate as an ITIN borrower. And like many undocumented immigrants, he’s being squeezed in other ways as enforcement has ramped up.Hugo was able to buy a house, but he can’t renew his driver’s license because of his status: Under pressure to crack down on undocumented immigration, North Carolina enacted a law in 2006 that requires a valid Social Security number to get a license.
Undocumented immigrants hoping to bring over the rest of their families have put their plans on hold as the migrant children crisis has ramped up border security. More employers are requiring workers to prove they are legally present, even in places like Durham, an area relatively welcoming to new immigrants. Tighter enforcement limits economic mobility for those who have jobs, too.If he had legal status, Hugo would leave the restaurant business and try to become a translator, a bilingual professional at a place like Duke University. Juan would become an electrician. But right now, they’re tied to employers who are willing to overlook their immigration status.
On their lunch break in downtown Durham, construction workers explained how some local contractors have started using e-Verify to screen job applicants, which prompted the departure of some of their coworkers last year.
Jason DiFillippo, 40, believes that restricting opportunities for undocumented immigrants makes sense. “I’ve been living here my whole life, I don’t my own home,” said DiFillippo, a father of three who works for a painting company. “If you don’t have the legal right to be here, they shouldn’t have legal rights here.”
He added: “They should start at the bottom, not with buying a home—it should be considered a luxury.”
Before the housing bust, North Carolina’s own Rep. Virginia Foxx introduced legislation that would require mortgage borrowers to provide valid Social Security numbers; extending other financial services to immigrants even triggered bank boycotts. While such animus has yet to resurface, some ITIN lenders remain concerned about potential backlash, relying on word-of-mouth rather than advertising to avoid turning themselves and their customers into political targets.
Similar concerns have held back the reemergence of a secondary market where lenders could resell ITIN mortgages and have the liquidity to make more loans—the market’s single biggest barrier to growth, according to Pablo DeFilippi of the National Federation of Community Development Credit Unions. “We’ve had conversation with funders, and everything is so politically charged,” he said.
Madiedo personally brushes off the controversy. “I’ve received death threats, I’ve received hate mail. None of that deters us from helping people become homeowners,” he said. At the same time, he also declined to name the bank that holds Alterra’s ITIN loans. “They’ve asked to remain a silent partner—hold the paper and own it, and we will be in front,” he said.
Hugo has a simple retort for those who don’t believe immigrants like him should be able to buy homes. “We’re better consumers than they are. We buy s–t. We love to buy cars—cars and trucks. We like to show off,” he said.
When they moved in this summer, Hugo immediately plowed more money into fixing up the house, installing granite countertops in the kitchen, tearing up the old floors, and putting in new laminate.
That’s just the beginning, Hugo said. Next up: a shade structure over the back patio, which overlooks the house’s sprawling backyard.
“There’s always something to do,” he said. “I don’t plan on moving soon.”
*Hugo and Juan declined to be identified by their real names given their undocumented status.