New legislation on Capitol Hill seeks to curb an increasingly popular mortgage practice: providing home loans to applicants using their Individual Taxpayer Identification Numbers (ITIN), in lieu of Social Security numbers.
ITINs are issued by the Internal Revenue Service to immigrant workers who do not qualify for Social Security numbers for use when they report their income and pay federal taxes.
Dozens of banks around the country have begun offering home mortgages to undocumented immigrants using ITINs, but their programs generally have been low-key and small. Bank of America stirred controversy earlier this month when it announced a pilot program in Los Angeles to provide credit cards to resident immigrants who lack Social Security numbers but have ITINs.
Some critics charged that the bank was seeking to profit by helping illegal immigrants who should be deported or prosecuted, not extended consumer credit. Bank of America said its program is legal and may be rolled out nationwide if the pilot is successful.
A bill (H.R. 480), introduced by Rep. John T. Doolittle (R-Calif.), would amend the Truth in Lending Act to prohibit financial institutions from providing home mortgages to anyone who does not have a Social Security number.
A statement from Doolittle's office said: "The government should not be in the business of creating incentives to encourage illegal behavior. Nor should companies be permitted to reward those individuals in clear violation of our laws."
Proponents of ITIN-based lending to home buyers say Doolittle has it all wrong. Timothy Sandos, president and chief executive of the National Association of Hispanic Real Estate Professionals, said Doolittle's bill would be "extremely disruptive" and affect far more people than the illegal immigrants the measure is purported to target.
Sandos estimated that as many as 8 million resident aliens in the United States do not have Social Security cards but are in some phase of the immigration process leading to citizenship. That process can take more than eight years and "meanwhile these individuals are working here, earning incomes, paying taxes, contributing to the economy."
They "are not illegal, they are undocumented," Sandos said. "The government knows exactly who they are and where they are." Doolittle's bill "is the equivalent of trying to drive a tack with a sledgehammer," he said.
A study conducted by Sandos's group -- which includes representatives of banks, real estate firms, developers, home builders and real estate service providers -- concluded that if mortgage companies made more use of ITINs to extend home loans to qualified buyers, $44 billion in new mortgages -- primarily to first-time buyers -- could be originated.
Geoffrey F. Cooper, director of emerging markets for MGIC Investment, a private mortgage insurer, said lenders in about 40 states already grant mortgages to customers using ITINs. MGIC's role is to provide insurance against losses to lenders in the event borrowers default or go to foreclosure.
Cooper said his company's program was initiated at the request of community banks and other local lending institutions that found that many of their customers who lacked Social Security numbers but had ITINs earned solid incomes and had stable employment histories and excellent payment histories on debt obligations.
Under MGIC's program, underwriting standards are strict, with mandatory documentation of income, assets, residency and other criteria -- stricter standards than many lenders impose on applicants who have Social Security cards.
Home buyers with ITIN mortgages "perform like 'A' credit borrowers," and they qualify for MGIC's favorable 'A-premium' insurance rates because they are so dependable, Cooper said.
Janis Bowdler, senior housing policy analyst for the National Council of La Raza, a Hispanic advocacy group, said home buyers who use ITIN mortgages should be seen simply as "hardworking, taxpaying families who want to participate in the American dream," even if they do not yet have Social Security numbers because of their immigration status.