The American dream: How undocumented immigrants buy homes in the U.S.
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Nearly 50,000 orders for deportation have been issued during the first six months that President Donald Trump has been in office. That’s a 27.8 percent increase from the year before, according to the Department of Justice. Those sent back have left behind not just jobs and families but also their homes — which some of them owned.
More than 3.4 million undocumented immigrants are homeowners, according to the Migration Policy Institute analysis of the 2014 U.S. census data. That’s about 31 percent of the undocumented population.
While some undocumented immigrants pay for their homes in cash, others have been able to obtain little-known ITIN mortgages. ITIN stands for individual tax identification number. ITINs were created to enable tax payment by foreign nationals who are not eligible for a social security number but own businesses or assets in the U.S. But since its creation, the program has also been used by undocumented immigrants living in the U.S. Undocumented immigrants can use ITINs to open bank accounts and pay taxes on their U.S. income.
Alterra Home Loans is one of the lenders that provides ITIN mortgages. They have issued about 300 such mortgages.
“Out of all of the ITIN loans that we’ve done, we have had three loans pay off completely and we’ve had zero loans default or go delinquent,” said Jason Madiedo, president and CEO of Alterra. To take out an ITIN mortgage, borrowers have to save enough money for a 20 percent down payment. The mortgage is a 30-year-fixed rate mortgages. “So, it doesn’t adjust and there’s no prepayment penalty,” explained Madiedo.
The ITIN loans usually come with a interest rate between 7 and 8 percent — depending on the market. That’s much higher than the typical 30-year-fixed mortgage rate, which is currently around 4 percent.
Owning a home is a “big dream” for undocumented immigrants when they come to this country, Madiedo said. When Trump was elected, many of them had questions about what impact the new administration might have on their home ownership and futures in the U.S.
“There’s a reasonable amount of concern and fear on the consumer’s part. But I will say that on a really positive note we have not seen a decline in use of the product,” Madiedo said. He points out that residency is not a requirement for real estate ownership in the U.S.
The longer undocumented immigrants live in the U.S., the more likely they are to own a home, according to Pew Hispanic Center. Back in 2008, 27 percent of undocumented immigrants who lived in the U.S. less than 10 years owned a home. That’s compared to 45 percent of undocumented immigrants who lived in the U.S. 10 years or longer who owned a home.
Undocumented immigrants pay as much as $3.6 billion in property taxes each year, according to the Institute on Taxation and Economic Policy which analyzed MPI’s undocumented home ownership data. The data helps dispel the myth that undocumented immigrants aren’t paying taxes, said Meg Wiehe, co-author of the report and a deputy director at ITEP. Even as some might remain skeptical over whether undocumented immigrants pay income tax, there is proof that they pay property taxes when they purchase a home.
“It can make a really good case that undocumented immigrants are not only contributing to our communities and our economies but also to our state budget and are supporting our state funding priorities through tax revenue,” Wiehe said.
Consequently, deportations of homeowners might have real impact on their communities.
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The question of what happens in case of deportations has always come up with these type of loans, even before this administration, according to Madiedo. Whatever the circumstances, mortgages have to be paid on a monthly basis or they become delinquent.
“The typical answer that we get is: ’We’re doing this for our family and our family will figure out how to maintain the payments. Don’t worry about how the payments are going to be made. This is a dream of ours. We’re going to make this happen,’” Madiedo explained.
“What you see is that even when someone is deported, the mortgage payment gets paid,” agreed Bruce Marks, CEO of the Neighborhood Assistance Corporation of America. “Within the immigrant community and within the family households there’s a plan B, C and D. Who’s going to live there? Who’s going to take over the mortgage payments? All that stuff.”
Most of the ITIN loans are made on a local level, typically issued by a local bank or a credit union. Delinquencies on such loans tend to be lower than typical mortgages. For example, Guadalupe Credit Union has issued $16 million in ITIN loans, according to a 2015 presentation at the National Federation of Community Development Credit Unions. The delinquency ration on these loans was 1.24 percent.
Similarly, the Latino Community Credit Union has issued 1,515 loans to DACA recipients — people who came to the U.S. as children and have been granted temporary relief from deportation. Those loans had a delinquency rate of 0.82 percent. Additionally, ITIN mortgages made up about 86 percent of the credit union’s mortgage portfolio and had a delinquency rate of 1.16 percent.
Alterra also works with DACA recipients. “When DACA first came out, we did about 700 of them that year,” Madiedo said. Since then, Alterra has issued mortgages to more than a thousand DACA recipients, who after qualifying for deportation relief receive a two-year work permits and social security numbers. Madiedo said Alterra will keep issuing both ITIN mortgages as well as giving loans to DACA recipients.
“We’re not stopping. I guess maybe we’re a little bit more scrappy as a company and willing to take those risks because we believe in our mission,” he said. Alterra, which has been in business for 10 years, focuses on helping the often under-served Hispanic market.
While Trump’s presidency might not have had an effect on Alterra’s business yet, according to Marks it has “sent a chill through the immigrant community.”
“That chill, which is really across the board for a number of different activities, has certainly impacted housing,” Marks said. “People are not willing to spend as much money. They’re not willing to open up businesses. They’re not willing to invest. And part of that reluctance to invest is investment in purchasing a house.”