When Rodrigo Lopez snuck into this country 25 years ago, there wasn’t the controversy there is today about undocumented immigrants. He put down roots, becoming a homeowner in 2004.
Lopez (not his real name -- he’s actually a composite made from the stories of numerous immigrants) never had a Social Security number, which most homebuyers use to prove their identities to lenders. Instead, he used an Individual Taxpayer Identification Number, or ITIN, issued by the Internal Revenue Service to identify himself.
ITINs are issued to taxpayers who are not eligible to obtain Social Security numbers, regardless of immigration status.
At times, Lopez worked 60 hours a week. He paid taxes, just like everybody else. He paid his bills on time, always in cash because he didn’t have any credit cards, and put a couple of kids through college. And he never, ever got into trouble with the law.
Lopez bought his house with a mortgage from a Midwestern bank under a pilot program spearheaded by the Mortgage Guaranty Insurance Co. That initiative fizzled, largely because investors wouldn’t buy loans in which their borrowers’ legal residency hadn’t been proven.
Nevertheless, hundreds, if not thousands, of undocumented immigrants are still using ITINs to buy houses.
Government figures indicate that more undocumented immigrants are leaving the United States than are entering, but nobody knows for certain how many remain here. The Federation for American Immigration Reform (FAIR) says 12.5 million people who’ve entered the country without authorization, or remained after their authorizations expired, still reside here. (According to the FAIR website, the group seeks “lower levels of overall immigration” but says that “immigration, within proper limits, can be positive.”)
Likewise, there is no official count of the number of lenders willing to write mortgages on behalf of undocumented immigrants. But Scotsman Guide, a monthly mortgage industry publication, lists 18 lenders who finance homebuyers on the basis of ITINs.
The IRS does not verify or validate information supplied during the ITIN application process, and neither do lenders who accept ITINs as identifiers.
Other than that, though, ITIN lenders check out potential borrowers -- vigorously.
“Nobody is trying to fool anybody,” says Raymond Eshaghian, president of Greenbox Loans, a Los Angeles-based lender that prides itself on the concept of “out-of-the-box” underwriting. “They have to qualify just like everybody else.”
Among other things, Greenbox verifies a minimum of two years’ tax returns and the applicant’s country of origin. “Just like the old days, you have to make common-sense lending decisions,” Eshaghian says. “Each application is analyzed, borrowers have to show they have the ability to pay, and you have to meet compliance requirements.”
Greenbox also charges for additional risk, currently 7 percent for a 30-year fixed-rate loan. For that, customers with ITINs can borrow up to $600,000 with 10 percent down if they have a credit score of 620 or higher, or 25 percent down if they have no score. But they need only 5 percent of their own money; the rest can come from family gifts.
Las Vegas-based Alterra Home Loans also charges higher rates to ITIN users, and wants 20 percent down. The company’s requirements include two years’ employment in the same or similar line of work and tax returns using the borrower’s ITIN for the preceding two years.
First National Bank of America in East Lansing, Michigan, offers ITIN loans in all 50 states. It wants at least 15 percent down (gift funds are allowed) and borrowers must document their income with tax returns or bank statements.
Not everyone favors allowing undocumented immigrants to become homeowners.
“It’s a form of insanity,” says Dave Ray, a spokesman for FAIR. “Any program that incentivizes illegal immigrants runs counter to federal law and undermines national security and public safety. If someone is here illegally, there has been no criminal background check or any other checks. They are a complete unknown.”
Eshaghian, however, says his ITIN clients are “excellent borrowers” and “very responsible.”
To that point, Guadalupe Credit Union in Santa Fe, New Mexico, reports that its delinquency rate among ITIN borrowers with auto loans and mortgages is 1.24 percent, compared to 1.85 percent for its entire portfolio. And the Latino Community Credit Union in Durham, North Carolina, which has 86 percent of its mortgage portfolio in ITIN loans, says its delinquency rate is 1.16 percent.
Both figures are far under the industry average of 4.63 percent as of this year’s first quarter, according to the Mortgage Bankers Association.
Eshaghian of Greenbox says he understands there is “a lot of sensitivity” surrounding undocumented immigrants.
“You can say all kinds of negative stuff, but you have to look at these families closely,” he argues. “They are not criminals. They are not trying to take advantage of this country.”
As far as he’s concerned, “it really says a lot when people who could really hide” come out of the shadows. “They could continue going under the radar, but they live here just like me and you,” he says. “And they want to do the right thing.”