Lenders use looser credit rules to tap into illegal immigrants

Edward Hegstrom:

Whether they need credit for a new couch or a mortgage for a home, undocumented immigrants are finding it increasingly easy to go into debt here.

Gone are the days when those who lacked a Social Security card had no chance of obtaining a loan. A recent liberalization among lending institutions means that those who are undocumented need not be unbanked.

Spanish-language radio stations carry ads for furniture on credit, with "no social" necessary. Banks, including Banco Popular and now Citibank, have started programs that allow illegal immigrants to buy homes by using an identifier issued by the IRS, known as the Individual Taxpayer Identification Number.

"It's kind of amazing, if you think about it," said Rob Paral, a research fellow for the Immigration Policy Center and a Chicago-based consultant. "You have banks that are explicitly marketing to illegal immigrants."

Paral completed a study for the National Association of Hispanic Real Estate Professionals in which he found that 231,000 illegal immigrant households have sufficient income to buy homes, which would bring a maximum of $44 billion to the national housing market if they had easier access to mortgages. He did not estimate how many illegal immigrants own their homes, though other studies have found the number to be surprisingly high.

Grocers, fast-food chains and discount retailers long ago recognized the growth in purchasing power among Spanish-speaking consumers, but they have no need to distinguish between legal and illegal immigrants.

Loans are different. Because a consumer can't open a bank account without some form of identification, banks must create specialized programs for the nation's estimated 11 million illegal immigrants.

The most common account for illegal immigrants uses a document issued by the Mexican government, known as the "matricula consular." As of last year, 29 banks in Texas allowed immigrants to open bank accounts with a matricula, a study by the Appleseed Foundation found.

But fewer banks will go so far as to offer a mortgage, and those that do usually require at least a matricula consular and an ITIN.

Even before banks offered mortgages, illegal immigrants found ways to buy homes. Some used programs such as contract-for-deed, in which a lender retains title to the property until it is paid off. Others would find a relative with a valid Social Security number and use their name, said Oscar Gonzalez, a local consultant and Realtor. Both of these strategies involved major risks.

Good statistics are hard to come by, but there is an indication that a number of illegal immigrants have managed to become homeowners. Recent interviews of Mexican immigrants at Mexican Consulates across the United States found that 10 percent of those with no valid U.S. identification own their homes, the Pew Hispanic Center said.

While some conservatives in Congress criticize banks for opening the door to illegal immigrants, the Bush administration has facilitated the process. The Treasury Department has upheld a ruling that the matricula is an acceptable identification for banking, and Treasury officials have made statements indicating they won't fault banks for loaning money to undocumented immigrants.

"It's not the job of financial institutions to enforce immigration law," Assistant Treasury Secretary Wayne Abernathy said last year at a Hispanic banking conference at which participants discussed new forms of loans that do not require a Social Security number.

Experts admit that the increase in mortgages for illegal immigrants has been possible only because the government rarely rounds up immigrants for deportation. This offers some stability.

A wave of deportations "would have a significant impact," Gonzalez said. "But I don't know if that's ever going to happen."

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