The nation’s big banks, scrambling for customers, are pitching mortgages to illegal immigrants.
Two years ago, making home loans to people who are in the U.S.
illegally was largely limited to community banks that wanted to
revitalize neighborhoods by offering low-cost mortgages to local
workers. There are signs that these loans, which comply with regulatory
requirements and which represent a sliver of the nation’s $10 trillion
mortgage market, are starting to take off in the broader banking
J.P. Morgan Chase & Co. is developing a pilot program to pitch
mortgages to illegal immigrants in Maricopa County, Ariz. If the bank
proceeds, the plan could launch as soon as this summer. The New York
bank joins Citigroup Inc., Wells Fargo & Co. and Fifth Third
Bancorp, which also are experimenting with the loans.
Genworth Financial Inc., meanwhile, is testing insurance products
tied to the loans. Deutsche Bank AG has teamed up with the Hispanic
National Mortgage Association to develop a secondary market where big
banks can sell and trade the loans, potentially reducing risk with
keeping the mortgages on their balance sheets.
“Whoever hits the street first with these loans will be the winner,”
says Timothy Sandos, president of the National Association of Hispanic
Real Estate Professionals. The group says at least $85 billion of
mortgages could be originated from 375,000 households occupied by
undocumented renters, up from an estimated $44 billion from 216,000
households a few years ago.
Providing financial services to illegal immigrants is drawing
criticism. Supporters say illegal immigrants contribute to the economy,
often pay taxes and can help bring rundown communities back to life.
Opponents contend that such lending can be risky because they know
little about these borrowers’ ability to repay the loans.
J.P. Morgan’s pilot program, called “Building a Dream,” is
generating dissension among some of the bank’s underwriters who are
reluctant to handle the loans for fear that they violate federal law by
encouraging illegal immigrants to stay in the country, said a person
familiar with the situation.
In Maricopa County, which includes the city of Phoenix, the sheriff,
whose office has arrested hundreds of illegal immigrants, said banks
providing these loans are taking on a risky proposition.
“If I catch these people, they are going back to Mexico and the
banks will have a tough time collecting on their loans,” said Sheriff