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Illegal-Immigrant Loans Have Been Solid Bets


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From the CofCC.org News Team…

Despite the downturn of the mortgage market, a type of home loan has remained surprisingly sturdy: one extended to illegal immigrants.

Now, the question is whether these loans will continue to hold up. A number of factors — including a possible government crackdown on illegal workers and a slowdown in job prospects for undocumented laborers — threaten the ability of these borrowers to keep paying.

A Department of Homeland Security plans to crack down on employers of illegal immigrants is giving some banks that issue ITIN mortgages the jitters. The new policy, which has been delayed by a court challenge, would force employers to terminate workers whose Social Security numbers and names don’t match. Those that don’t comply would face stiff penalties or criminal prosecution.

Undocumented workers normally use an invalid Social Security number to obtain work. But they can pay taxes with a nine-digit alternative number that the Internal Revenue Service started issuing in 1997 to foreigners who aren’t eligible for a Social Security number.

A few months ago, Hispanic National Mortgage Association, a privately held company nicknamed “Hannie Mae,” began buying ITIN mortgages from lenders. Once it has bought the loans, HNMA packages them into securities for investors.

Banks in the Midwest have been the most aggressive in offering ITIN loans, following an initiative by the Federal Deposit Insurance Corp. to encourage banks in Chicago to lend to immigrants, regardless of their immigration status.

Despite the high-yield potential of ITIN mortgages, the majority of players in the ITIN-mortgage segment are small banks rather than large national institutions. Concern over the controversy that can erupt over serving the illegal-immigrant community is widely regarded as preventing big banks interested in the Hispanic market from joining the fray.

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