Mortgage lenders court illegal aliens
Articles
MILWAUKEE -- Javier and Araceli Garcia, illegal immigrants from Mexico, never imagined that the U.S. government would help them realize their dream of owning a home.
But last year, the couple secured a $54,600 mortgage to buy the gray, 1,158-square-foot bungalow that they had been renting for eight months. The Wisconsin housing authority financed the loan. The Internal Revenue Service gave them an identification number that enabled them to apply for it at local Mitchell Bank, which was happy to take their business.
"We thought we would never buy a home, because of our (illegal) status," said Mrs. Garcia.
Competition for new customers is driving banks to offer home loans and other financial services to illegal immigrants -- and they are getting help from government agencies, such as the Federal Deposit Insurance Corp. The FDIC encourages banks to lend and invest in underserved markets regardless of customers' immigration status.
The official helping hand comes as other corners of the government take an increasingly hard line against undocumented immigrants. In May, Arizona legislators passed a bill to bar illegal immigrants from English classes, child care and other state-subsidized services; it was vetoed by the governor. In Kansas, opponents of a measure to offer in-state tuition to college-bound students who are illegal immigrants have taken legal action to prevent its implementation. Also in May, Congress approved a measure containing a provision that would make it impossible for illegal immigrants to acquire a driver's license.
"There is a fundamental contradiction here," says James Smith, a senior economist at the Rand Corp., a Santa Monica, Calif., think tank. "We have one policy saying you can't be here illegally. In practice, another policy is saying that if you're here, we're going to cater to you."...
Like many parts of the U.S., this state of dairy farms and heavy industry has seen its Spanish-speaking community swell in recent years. Immigrants, mainly from Mexico, have journeyed here to fill jobs in construction, foundries and other low-skill industries. Latinos represent only 4 percent of Wisconsin's total population. But the population doubled between 1990 and 2000 to about 200,000, and continues to grow. The Hispanics are concentrated around Milwaukee and Madison, the state capital....
In Milwaukee, Mitchell Bank has seen those changes up close. It was founded in 1907 by the Schneider family, who named the bank after the main street in the bustling area known as the South Side. For most of its history, the bank served Polish and German immigrants. As European families moved to the suburbs, Mitchell Bank opened new branches there. But bank loyalty didn't transfer to young customers, who preferred big banks with ATMs on every corner.
In the 1990s, Mitchell Bank's old turf on the South Side began to see an influx of Latino immigrants. Taco shops and clothing stores playing piped Mexican folk music proliferated. James Maloney, the chairman of Mitchell Bank, saw the newcomers as a solution to the bank's declining fortunes. Its assets had dropped to $60 million in 1999 from $95 million in the early 1990s.
One afternoon in 1999, he walked into the bank and saw no one in the expansive hotel-like lobby but the staff. Outside, the street was filled with Latinos. "If all these people were working here and living here, I knew we had to change what we do," said Mr. Maloney, a labor attorney who took over the bank after his father-in-law died in 1991.
Mr. Maloney promoted Frank Villa, a teller and the sole Hispanic employee, to customer-service representative. He re-hired a Latina former staffer and recruited many others. The new employees translated the bank's brochures and deposit slips into Spanish, and hung banners in Spanish outside to lure passersby. Inside the bank, a painting of Mexico's patron saint, Our Lady of Guadelupe, was prominently displayed....
The bank also offered pamphlets on how to apply for a Wisconsin state ID and driver's license, and invited the Mexican consulate in Chicago to visit with a mobile unit that issues "matricula" cards, another form of identification, issued by the Mexican government and often accepted by banks. In early May, it sent out letters to 2,400 of its undocumented customers warning that Congress was on the verge of passing a federal law, dubbed "Real I.D.", that would make it more difficult for illegal immigrants to get drivers' licenses.
Mr. Maloney decided in 2002 the bank should also start offering mortgages even to illegal immigrants, convinced that would revitalize the run-down area and generate new business. The move would be in line with a federal law, enforced by the FDIC, that requires banks to invest in the communities in which they gather deposits, according to the banker.
Because most undocumented immigrants don't have a credit history, the bank decided to consider utility, rent and overseas-remittance receipts in assessing their creditworthiness. A letter from a pastor was also welcome.
As demand for home loans gradually increased, a problem arose: Taking on the loans was creating more risk than a small bank could shoulder on its own. That's because unlike other mortgages, the loans were not sellable on the secondary market to Fannie Mae and Freddie Mac, which currently don't deal in loans for illegal immigrants as a matter of official policy....
The issue was resolved last year, after Mr. Maloney made a presentation to the Wisconsin Housing and Economic Development Authority. Its mission is to help low-income families buy homes by offering mortgages at preferential interest rates that are fixed for 30 years. The housing agency regards its home-ownership program as key to combating predatory lending, which has exploded in poor inner cities, and revitalizing downtown neighborhoods. The state agency decided to start a pilot program for undocumented immigrants.
"We can stick our heads in the sand and pretend these people don't exist, or we can help them be in the U.S. with assets," says executive director Antonio Riley, the head of the Wisconsin housing authority...
Like Mitchell Bank, the housing authority uses the IRS-issued tax-registration number, the Individual Taxpayer Identification Number, or ITIN, instead of a Social Security number, which illegal immigrants generally cannot obtain. The banks need such numbers because they have to report their income to the government. In 1997, the IRS started issuing ITINs to foreigners who aren't eligible for a Social Security number to encourage them to file an income-tax return, regardless of immigration status. As of December 2004, the IRS had issued eight million such numbers....
Dozens of small banks in such states like Ohio, Illinois, Iowa and Texas have recently started offering undocumented immigrants [illegal aliens] the opportunity to apply for home loans with an ITIN. Big banks, like Wells Fargo & Co. and Bank of America Corp., say they plan to launch their own programs within months. Don Cohen, a vice president at North Shore Bank in Milwaukee, which offers ITIN mortgages, says he has fielded inquiries from banks in Alabama, Minnesota, Mississippi, South Carolina and Washington, among others interested in serving undocumented immigrants.
For its part, the Wisconsin housing authority is stepping up efforts to promote its program to help immigrants get mortgages. Since last April, it has disbursed 112 ITIN-mortgage loans valued at about $12.2 million in total. The housing authority has been flooded with inquiries from housing agencies and lending institutions in other states. The Illinois Housing Development Authority, for one, is expected to unveil its ITIN mortgage program this summer....
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