Mortgages to Illegal Immigrants Come Under Fire
Produced by Ashley Gross on Tuesday, October 16, 2007
The Chicago Public Radio
Immigrants have become key to fueling growth in the Chicago area housing market in recent years.
According to a report given to the governor last year, immigrants made up more than 80 percent of new homeowners in suburban Cook County from 2000 to 2005.
But the maelstrom over immigration policy has slowed down one part of that market.
Banks that had begun to make mortgages to undocumented immigrants in recent years have now gotten skittish, and would-be borrowers are also hesitant.
And at least one lawmaker in Washington wants to close the door on the practice completely.
As part of our ongoing series Chicago Matters: Beyond Borders, Chicago Public Radios Ashley Gross brings us the story of one undocumented immigrant who recently bought a home in Berwyn.
A note to listeners, the homebuyer agreed to be interviewed only on the condition that his and his familys names be changed.
Nine-year-old Pablo Lopez tears down the stairs to his new basement.
Ambi: Sound of running down the stairs
The couch and floor are strewn with tiny plastic dinosaurs and a Mr. Potatohead toy.
PABLO: Its kind of messy. We were playing right here.
The Lopez family moved into this two-story brick home in April. Up until now, Manuel Lopez has always rented an apartment for himself and his family. Pablo says this is a big improvement.
PABLO: Cause you can do whatever you want.
MANUEL: Otherwise sometimes too much noise, running till midnight, and people downstairs complaining that they want to sleep, so I was always telling them hey, quiet, dont run at that time, so small things that makes the life easier.
Manuel Lopez came to the U.S. on a tourist visa in 1999 after his bus-driving business in Ecuador failed due to runaway inflation. He stayed here illegally and eventually brought over his wife and son and had another daughter here. He makes about 40-thousand dollars a year working for a downtown Chicago parking garage. Two years ago, he started looking to buy a house but the interest rates his broker quoted him were 8 to 9 percent. Then he heard about a program with much better terms run by Citibank and the non-profit group Acorn Housing.
MANUEL: So I went there and it was possible, just I had to show papers that Ive been good in my payments. If I had some line of credit. It wasnt hard for me.
He bought the house for 230-thousand dollars with a 30-year fixed rate mortgage set at 6 percent. The program required that he pay three percent down. Lopez is just one of about 900 undocumented immigrants who have gotten mortgages from the Citibank Acorn program nationwide in the past few years. And theyre by no means the only ones in the business.
Ambi: Sound of calculator
At Second Federal Savings and Loan in Chicagos Little Village neighborhood, tellers count out bills in Spanish to their predominantly Latino customer base.
Ambi: Sound of teller counting in Spanish
This savings and loan got its start serving Eastern Europeans but had to adapt or die once the neighborhood changed. Mark Doyle is president and CEO of Second Federal. His bank became one of the first to pioneer the practice of making mortgages to undocumented immigrants several years ago.
DOYLE: Loan applications were astounding. I mean, we had 40 million dollars in the pipeline in one four-week period of time. And we did those loans for a good period of 8, 10 months and then we cut it off. We curtailed that activity because we couldnt handle the volume.
But the bank was soon able to get back into it. What made this whole market possible is that back in 1996 the IRS started offering illegal immigrants a way to pay taxes. The IRS created something called individual taxpayer identification numbers, or ITINs. People without social security numbers who earn money in the U.S. are still obligated to get ITINs and pay tax whether or not theyre here legally. More than 10 million people have gotten ITINs since the system was created. And now theyre able to show those tax returns to banks as proof of income in order to get mortgages. Still, Doyle says most ITIN holders lack a regular credit history. So Second Federal had to get creative in assessing credit worthiness.
DOYLE: We have to go to local churches to find out if theyre a member of that parish, are they paying weekly. If theyve borrowed money from an uncle to buy a pickup truck, theres a paper trail behind that, so we look for the check, we take a look at the title, we make sure they paid him back. If theyre a tenant, you know, we look for receipts, proof theyve been rent to their landlords. The underwriting on an ITIN loan typically takes at least 6 hours.
And thats three times as long as a regular loan. He says its worth it because the ITIN loans have performed well. But lately, volume has dropped to as few as six applications a month versus 40 a few years ago. Doyle says one reason is competition from other banks. Another is the political climate. The government plans to send so-called no-match letters to employers warning them that they face penalties if their workers are illegal. That could trip up people with ITINs who use fake social security numbers to work. A judge has temporarily blocked the letters, but Doyle says potential borrowers are intimidated.
DOYLE: Theyre afraid. If an employer now has to go to their people and say he has five people who dont have a valid social security number and tell them if you dont give me a valid social security number in 90 days, Im going to have to fire you, if enough of that happens. People have two choices they can go back to Mexico or theyre going to go underground.
And Mari Gallagher, a Chicago-based consultant whos researched the ITIN mortgage market, says banks are also thinking twice.
GALLAGHER: The big players have other issues right now in the mortgage industry, so theyre not going to be spending their time figuring out the ITIN mortgage. So I think its the small banks who will keep pushing the envelope, and then if it looks like its a safe area again, banks as other markets dry up might revisit it, but I think with the political current right now, banks are wary.
And they have good reason to be.
Ambi: Sound of newspaper rustling
CHEREE CALABRO: This is about the first home loan, and this is a picture from the coverage of us protesting at the bank in Hammond, this was our first protest.
Thats Cheree Calabro. She heads a group called Indiana Federation for Immigration Reform and Enforcement. Shes pulled out a folder of newspaper clippings documenting her groups 7-month protest of Bank Calumet after the bank made its first mortgage to an undocumented immigrant. They handed out flyers to bank customers saying the practice is illegal. Calabro says the bank wasnt happy.
CALABRO: They got pretty upset with us. They didnt want us to step on their property, so what I did is I bought one of those extendo-rods, its for reaching objects on high shelves, and I would put the flyer in it so I could reach across their property and hand it to the people as they sat in the drive-thru.
In other words, pretty much a banks worst nightmare. Calabro says they persuaded some people to close their accounts including one person she says withdrew 100-thousand dollars. When First Midwest Bancorp bought Bank Calumet in spring of 2006, they stopped making ITIN mortgages. Calabro says thats what shed like to see happen all across the country.
CALABRO: I mean you shouldnt be rewarded for your illegal activity, neither the banks nor the illegal aliens should be rewarded for their crimes.
Calabro points to a section of the immigration code that says its a crime to aid or abet illegal immigrants for financial gain. But a spokesman for the Federal Deposit Insurance Corporation says ITIN mortgage lending is legal. Congressman John Doolittle a Republican from California introduced a bill earlier this year to make the practice illegal, but it didnt get to the floor for a vote. Mark Doyle of Second Federal says homeownership should be encouraged regardless of immigration status.
DOYLE: People are more responsible for their neighborhoods. Theyre more attentive to their schools and churches and they take care of their homes.
Back in Berwyn, Manuel Lopez has been landscaping his backyard. Hes painted his front railings and put new windows in his basement. He says that when he applied for his mortgage, he worried someone might discover his illegal status and deport him. But he says he decided it was more important to pursue opportunities for his family.
LOPEZ: It cannot stop you in the way that you dont give one step forward. If we start to live in that way, maybe were going to be afraid of everything.
And ultimately that fear would undermine the security hes strived to build for himself and his family by buying this house in Berwyn in the first place. Im Ashley Gross, Chicago Public Radio.
The executive producer of Chicago Matters: Beyond Borders is Sally Eisele and the series is produced by Alexandra Salomon. Alison Cuddy is the Project Coordinator.
Chicago Matters is an annual public information series made possible by The Chicago Community Trust, with programming by Chicago Public Radio, WTTW 11, the Chicago Public Library, and The Chicago Reporter.
Visit www.chicagomatters.org for more information.