Friday, February 22, 2008

Illegal Immigrants are a Good Mortgage Risk

In a recent Tennessean article, columnist Phil Valentine speculated that the reason we are experiencing a mortgage crisis is because illegal immigrants are getting home mortgages. His basis for this was that several of the nation's leading mortgage companies that are participating in Project Lifeline make mortgages to illegal immigrants. Project Lifeline is a program that will allow people facing a mortgage foreclosure and an additional 30 days to try to work out a plan to avoid foreclosure.

Mr. Valentine’s speculation is contrary to fact. In actuality illegal immigrants are a good mortgage risk. The type of mortgages that illegal immigrant get is called an ITIN mortgage. To qualify, the applicant must have a form of identification known as a matrĂ­cula consular, which is an Id card issued by the local Mexican Consulate. (You may want to think of this as their “Illegal Alien” id card.) They must also have a W-7, which is also know as an individual tax identification number (ITIN), insured by the IRS. The ITIN allows the illegal immigrant to pay federal income taxes.

They must have two years income tax returns, two years work history, and a bank account. Their income must be verifiable and stable. They must also have two year history of non-traditional credit which must include two years rent history and three other sources of credit which may be bills they have paid on time such as utility bills or cable TV, or some others monthly bill. This is more documentation and a more stringent standard than is required on lots of other alternative type mortgage products.

According to a recent article in the Wall Street Journal, ITIN mortgages have a delinquency rate of about 0.5%. That compares with 1% for prime mortgages and 9.3% for subprime mortgages extended to those with spotty credit histories.

Before we jump to conclusion and blame society’s woes on illegal immigrants we should get our facts correct. Mr. Valentine will not let facts get in the way of a good opinion.

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