Illegal Immigrants and Home Mortgages

(image by Neubie via Flickr)

A funny thing happened on the way to the financial meltdown: illegal immigrants, who by Federal law shouldn't even be in the United States, turned out to be some of the most trustworthy borrowers in the country.

While illegal immigrants aren't issued Social Security numbers, they can apply for an Individual Taxpayer Identification Number (ITIN) which allows them to pay their income taxes. Starting in 2003, during the height of the real estate boom, many banks and credit unions began allowing undocumented workers to use an ITIN to establish their identity when applying for a home loan. During the next few years, as many as 12,000 ITIN mortgages were issued to illegal immigrants.

While some banks discontinued the practice after being criticized for catering to "illegals," those that endured the political pressure have reported results that some might find surprising: illegal immigrants have been more responsible borrowers. According to the Wall Street Journal, one out of every ten subprime mortgages went into delinquency last year while the rate for ITIN loans was only one out of every two hundred. Because of their illegal status, most of the immigrants who received ITIN loans were carefully vetted, had to make substantial down payments and received more stable fixed rate loans.

But as the overall housing and mortgage market collapsed, lenders stopped issuing ITIN loans. For now, undocumented workers remain locked out of the real estate market, no matter their sterling reputation in the banking world.