Three years ago, Jose Perez purchased a small condo northeast of San Francisco for nearly $250,000. Since then, the first-time buyer has watched the housing market collapse.
But Perez has managed better at avoiding foreclosure than thousands of other U.S. homeowners who bought at the peak of the market.
What makes his case special is that Perez is an illegal immigrant.
Home loans held by illegal immigrants in California and across the nation generally have had fewer delinquencies than similar loans held by U.S. citizens, in part because of stricter lending requirements, according to banks, insurers and Realtors.
“Every indication is that their performance is better than the average” mortgage account, said Tim Sandos, president of the National Assn. of Hispanic Real Estate Professionals.
More than 12,000 home loans were issued in recent years through a special program that relies on government-issued taxpayer identification numbers instead of Social Security numbers, according to the association.
The identification numbers, known as ITINs, were designed for foreign-born residents living legally in the U.S. but are widely acknowledged to be used primarily by illegal immigrants.
The real estate association does not keep statistics on foreclosure rates. But it has reported that the delinquency rates for taxpayer identification loans were 1.15% or lower in 2006, compared with about 3.5% for other home loans.
Although illegal immigrants are also feeling the effects of the downturn in the U.S. economy, Sandos and others cite one major factor for the success of taxpayer identification loans: stricter requirements, including larger down payments, pre-purchase counseling and fixed mortgage rates.
But there is another reason, Sandos said.
“They come for the promise of a better future,” he said. “They come for the promise of homeownership. Once they have it, they are going to move heaven and Earth to keep it.”
Perez said that when he lost his job as a chef, his wife started working as a housecleaner. The couple dipped into their savings to pay the bills. Twice, they paid the mortgage on the 16th, one day past their grace period. But in July, Perez started a new job and resumed his on-time payments.
He said he sees his purchase as a unique opportunity.
“I was surprised that a bank actually was risking their money on a person like me,” he said. “But they get their monthly payment with dues. They did a good business.”
His agent, Pedro Morlet, said the 30-year fixed rates were crucial for clients who bought homes using their taxpayer identification numbers.
“Their mortgages stayed the same,” he said. “They continued with the low payments, while a lot of people saw their mortgages go up $800, $1,200 or $1,500" a month.
So even if the buyers owe more on their mortgages than their homes are worth, they can still afford the payments.
Advocates for tighter immigration controls oppose the idea of illegal residents buying homes in the United States. They say it only encourages illegal immigration.
“I don’t believe they should be here to begin with,” said Rick Oltman, spokesman for Californians for Population Stabilization. “So I don’t believe that they should be . . . going to college on the taxpayer dollar, getting jobs or buying homes.”
At least one Chicago bank started issuing taxpayer identification loans in 2000, and several other banks followed. The majority of the loans were issued in the last few years, at the same time that subprime loans hit their peak.
Many of the mortgages nationwide came out of a partnership between Citibank and Acorn Housing, a nonprofit group that helps the poor. Citibank said the taxpayer identification loans have some of the lowest delinquency rates among all affordable-lending programs.
“We believe that it has been a very successful program in terms of delinquencies,” said Mark Rodgers, vice president of public affairs for Citi consumer banking. But Rodgers said it was too early to gauge foreclosure rates, because nearly all of its loans are less than 2 years old.
The Hispanic National Mortgage Assn. underwrote more than 2,000 such loans, but only about 20 were in California because of the shortage of affordable housing.
Leonardo Simpser, the association’s chief executive, said the loans did “extremely well.” In addition to strong pride of ownership among buyers, Simpser attributed the success to the underwriting process. The association accepted nontraditional credit history but was very strict with income requirements.
Despite the success of such loans, availability of new mortgages is starting to drop off. Mary Mancera, spokeswoman for the National Assn. of Hispanic Real Estate Professionals, said this is the result of the larger credit crunch.
“If people with traditional credit history are having a hard time getting money, it stands to reason why these have dried up,” she said.
Michael Zimmerman of Mortgage Guarantee Insurance Corp., which insured about 1,000 taxpayer identification loans from 2004 to 2007, said the organization stopped insuring such loans last year because of a lack of demand by lenders.
He said Mortgage Guarantee Insurance is continuing to insure existing loans, which have performed well.
Zimmerman, senior vice president of investor relations, said the company did not do any automatic underwriting but instead relied on rent receipts, pay stubs and tax returns to make sure buyers were able to afford the homes.
Bruce Dorpalen of Acorn Housing said he has seen few foreclosures among undocumented home buyers enrolled in the Citibank program.
He said many buyers own their own businesses, have U.S.-born children and have money saved. If they do get into financial trouble, he said, many have an extended family safety net.
“If someone lost a job, there would be other people stepping in to help find a job or make the payments,” he said.
USC professor Dowell Myers, who has studied housing trends among immigrants, said they are an increasingly important part of the housing market, in Los Angeles and around the nation, especially as baby boomers start to sell off. The banks have realized that and have reached out to immigrants, despite their legal status.
“They are judging them based on their character,” he said.
“Based on the success of the ITIN mortgage, apparently they are making a good bet.”