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Commentary February 16, 2006


Illegal Aliens Being Recruited for Loans

Illegal Aliens Being Recruited for Loans


“Why should illegal aliens be able to get home loans at an interest rate less than a legal resident?  Why should they be able to get home loans at all?”


These were common questions asked heatedly recently following the revelations contained in a story by Janine Zúńiga in the San Diego Union-Tribune.


It’s reported a major U.S. bank has funded its first home loans to illegal Mexican immigrants in San Diego County in a move that targets a lucrative, wide-open market while providing new grist for the debate over illegal immigration.


What, in particular, has attracted a great deal of notice and criticism is that the home loan rates offered illegal aliens are better than those generally available to legal residents.


The market is vast and the level of interest in the program is high, especially since the loans typically offer below-market interest rates, down-payment assistance and require no mortgage insurance.


As just one example, let’s look at Estela.  She received a 30-year fixed mortgage at 5 percent interest, 1 percentage point lower than the standard rate. It costs $780 a month. Estela's home was appraised at $565,000.


Who is Estela? 


Estela is an illegal alien, a divorced mother of two, has worked since 1992 as a house cleaner in Del Mar and, later, in Rancho Santa Fe. ACORN Housing officials disclosed her identity to The San Diego Union-Tribune  on the condition her full name not be used.


Six years ago, her American friend used $24,000 of Estela's money to buy a South County home. In July, a $12,000 lien was placed on the home because of unpaid back property taxes. The friend transferred the title to Estela. At the time, the mortgage had a balance of $140,000. Estela acknowledges not paying tax bills for two years, saying she didn't receive them. When Countrywide Home Loans found out about the title change, and that she was an illegal immigrant, it demanded full payment. They even offered to give Estela a loan but it required a Social Security number. Estela had 75 days to come up with $152,000, the loan balance plus the back taxes. After frantic calls for help, Estela found ACORN Housing. 


Estela's 26-year-old son, who has a two-year biotechnology degree from a community college and works as a waiter, said the family moved from Mexico to San Diego County 16 years ago. His sister is now in her third year of law school in Northern California. He can't believe they own a home. “Like I was telling my mom, some people come here and abuse the system,” he said. “My mom never applied for welfare or anything. She's worked and paid taxes. I think people who don't get in any trouble should be given an opportunity to own a home. I'm just glad we found someone to give us that opportunity.”


She has lived, worked and paid taxes in San Diego County for 13 years but has no legal right to be here. However, Estela does have a tax-ID number.


Her story is common among illegal immigrants who buy homes: They buy property with someone who has documents or use fake Social Security numbers and names.


In October, Estela signed the final documents for the new mortgage issued by Citibank.


The local tax-ID program has kept a low profile – no Citibank or ACORN-issued news releases – because of the anti-immigrant backlash that the overall program has drawn. Citibank has processed 72 tax-ID loans nationally since October 2004, half in California.


The local program, which uses tax identification numbers instead of Social Security numbers, is similar to programs run by small lenders – and two state agencies – around the country that have distributed millions of dollars to illegal immigrants over the past few years.


“There is a huge untapped market out there, but it is a controversial program,” said Sarah Lumbert, office director of San Diego's ACORN Housing Corp., part of a national group working with Citibank to provide tax-ID loans.


Only two tax-ID mortgages have been processed locally, but about 10 local Citibank loans to illegal immigrants may soon be finalized with the help of ACORN, the Association of Community Organizations for Reform Now. The nonprofit organization receives much of its funding from the Department of Housing and Urban Development.


Tax-ID numbers are used by those who need to report federal taxes but are not eligible for a Social Security number, usually because they are illegals. Until the past few years, lenders would not – and most still do not – accept anything but a Social Security number for home loans.


Wells Fargo recently seized on the market, joining Citibank as the only nationwide banks offering tax-ID loans. Wells Fargo started its pilot tax-ID loan program in Los Angeles and Orange counties in December. Chuck Lemoine, a Wells Fargo senior vice president, said providing tax-ID loans is legal and that reaching out “is not only the right thing to do, it's good business.”


ACORN counselors knock on doors promoting the program.


Often, family members pool resources to afford the county's pricey market. With Citibank, as many as eight people can sign for a mortgage. Thus you tend to have more and more homes with multiple families, up to eight, living in them.


As passionate as real estate professionals are about the program, critics are just as passionate in attacking it.


“We're seriously looking at getting these banks charged with aiding and abetting someone who's a criminal,” said William Gheen, president of the national group Americans for Legal Immigration. “Illegal aliens are criminals.”


Gheen says the program encourages illegal immigration. And Americans, he argues, are losing loans to illegal immigrants. “It's highly offensive to our legal citizens who have to jump through hoops with their credit files to get home loans and they're giving loans to people who have no credit whatsoever,” Gheen said.


Some fault the federal government for sending inconsistent messages. On one hand, they say, the government is trying to step up measures to curb illegal immigration. The U.S. House of Representatives passed legislation in December to build 700 miles of fencing along the U.S.-Mexico border. The same measure would require mandatory detention of illegal immigrants and increase penalties for employers who hire them. The legislation was referred to a Senate committee in January.


On the other hand, there has been no movement by Washington lawmakers to put a stop to the tax-ID loans, and the government routinely issues tax-ID numbers. The IRS has issued such numbers since 1996 to foreigners to encourage them, regardless of their immigration status, to file tax returns.


There is nothing illegal about the loans. Congress has passed a series of fair-lending acts, similar to the 1977 Community Reinvestment Act, that ensure equal access to mortgages for low-income and minority households.


The law does not require banks to check immigration status, Federal Deposit Insurance Corp. spokesman David Barr said. “We don't encourage banks to reach out to illegal immigrants,” he said. “But through the Community Reinvestment Act, they must reach out to minority groups, and a large part of that group is the Hispanic population and many are new arrivals to this country.”


Citibank and ACORN are offering the program at all of ACORN Housing's 12 California offices. Smaller lenders have taken the lead with the loans in at least nine states. Housing agencies in two states also have taken part, prompting backlashes there.


The Wisconsin Housing and Economic Development Authority has issued 242 tax-ID loans worth $27 million since March 2004. That spurred two measures, pending in the Wisconsin Senate and Assembly, that would prohibit the housing authority from funding home mortgages without Social Security numbers.


A similar state-backed program in Illinois was announced in December. Critics plan to introduce legislation to stop it.





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