Yesterday, we covered the potential problem that the state of Arizona stands to encounter in its real estate market as tens or hundreds of thousands of illegal immigrants flee the state in response to the controversial new law requiring all people in Arizona to carry proof of U.S. citizenship[1]. Real estate experts and market analysts predict that the mass departure could spur a wave of foreclosures as those people leave empty houses and unpaid mortgages behind them, or are unable to continue making payments on those mortgages as their sources of (illegal) employment dry up. Lenders are not likely to be particularly inclined to work with illegal immigrants on short sale options, either, even if they were not at all reticent about making the loan in the first place without documentation.
Interestingly, neither lenders nor real estate agents who sold properties to illegal aliens appear to feel much responsibility for the problem. Some argue that they sold the property to a legal-illegal combination buyer, situations in which one spouse is legally in the country while the other entered illegally[2]. Still others state simply that “We didn’t feel like it was our job to be an enforcement agency,” as one Phoenix real estate agent put it[3]. Some described the issue as a “don’t ask, don’t tell” approach, or detailed how they might recommend against purchasing a home if neither owner was legally in the United States, but would not actually refuse to do the deal[1]. The Arizona Republic reported that “lenders eager to make loans did not check for documentation [or] in others, there may have been fake documentation.” Either way, all signs indicate that these lenders were happy to take payments as long as someone was making them, but are not willing to stick their necks out further under new, more stringent supervision and negotiate short sales with these illegal owners who legally should not have been able to obtain loans in the first place.
The Department of Homeland Security estimates that more than 100,000 illegal immigrants left the Phoenix area in 2008 thanks to the state’s increasingly strict employer sanctions that prohibit hiring illegal aliens, causing a dramatic increase in foreclosures and apartment vacancies then. If only a portion of that population exited at that time, imagine the impact of a new wave of exits, particularly considering that people tied to homes might have been less likely to leave in the previous exodus.
What do you think? Are real estate agents and mortgage brokers responsible for “doing their part” to curb the illegal immigration problem – particularly since their silence on the issue can have such devastating impact such as is happening now?
Thank you for reading the Bryan Ellis Real Estate Letter – your comments and questions are welcomed and encouraged.
[1] http://www.azcentral.com/arizonarepublic/news/articles/2010/06/14/20100614arizona-immigration-real-estate-foreclosures.html
[2] http://www.myfoxphoenix.com/dpp/news/housing_market/immigration-law-housing-market-6-14-2010
[3] http://www.upi.com/Top_News/US/2010/06/14/Immigration-law-could-hit-home-values/UPI-35611276556763/
It is their responsibility to be 100% above board. They should lose
their license.
It’s not a loan officers responsibility to ask for proof of citizenship unless the lender requires it. At closing, borrowers are asked to bring 2 forms of identification, not proof of citizenship. Possibly lenders realize that they will knock out a good portion of borrowers with such a requirement. (I’m being facetious but who knows?)
Here’s how this will pan out. If an increase in foreclosures in AZ occurs due to the new law, Fannie or Freddie or HUD will notice it and will change their guidelines to begin requiring proof that borrowers live here legally. Then everyone else will fall in line. I give it a year or so.
You know, this discussion has me thinking to write a few representatives with the suggestion they introduce a bill requiring the GSE’s to document legal residence. Maybe I could help speed things up a bit.
As investors, we all have to do our due diligence when buying a house. Part of that information comes from third parties; e.g. recent comparable sales reports, etc….. however consider what would happen if that info or other sources are flawed…. I feel part of the responsibility of realtors is to “qualify” a prospective buyer so that they protect their sacrifice of time showing houses and other duties they must perform. I also believe they should “nip it in the bud” if they find out a prospective purchase is an illegal alien. (And they refer to investors as unprofessional????) However, part of the mortgage companies’ problems is that they didn’t do their own “due diligence” when qualifying these borrowers by verifying income properly as well as citizenship. They are now getting no sleep in the beds that they made. I think in the long run there will be an improvement in the quality of neighborhoods in the Phoenix area, but before that happens, I just may invest in some Arizona property to play golf in the warm sunshine and watch the home values consistantly go up over time….. Don’t get me wrong, I live in the greater Houston area; we have many illegals here too. I admire the close hispanic family structure, their work ethics and culture, so my comments are not racially motivated. But one cannot ignore statistics, and where one has no regard for law, crime will always follow. All we ask of all potential citizens is that they go through the process legally.
Out of curiousity Ron, what about the responsibility a mortgage broker has to his own company? One here illegally would have have the tendency to flee if laws got tough… Doesn’t he have a “fiscal” responsibility to his own company? That adds to the overall costs proportionally the more illegal aliens are approved for loans. Any thoughts on that anyone?
MOST OF LOANS TO “ILLEGALS” ARE 100% “LEGAL”
What happens is that before the crisis, the regulations to get a home loan were very ambiguous regarding the list of docs required. “Proof of Citizenship” had never been an issue and people were “legally” getting a loan with an ITIN instead of SSN
For your information people, most “illegals” pay taxes with AN ITIN number, issued by the IRS for people without a social to ACTUALLY PAY TAXES.
That means that yes, people is here “illegally” and have “illegal jobs” but the have to LEGALLY PAY TAXES.
Now what lenders did is that if the person is LEGALLY paying taxes, they could get a LEGAL LOAN using their INCOME TAXES to prove their income and as far as a “Government ID”. The regulations were NEVER clear enough as to if the “Government ID” had to be a “USA” or “any other government ID”, which that’s why lenders took passports and consular ID’s (matricula consular) to make these loans.
How do I know? I once worked as a secretary for a lender broker that had more than 11 loans in the pipeline, and ALL were “full documented” loans…every single file was complete with the right docs….but not socials nor USA ID…JUST ASK Banco Popular, Bank of America, Washington Mutual, Taylor Bean and Whitaker, Wells Fargo… ALL OF THEM made these type of loans.
Since you are at it and I really respect you Brian, it would be interesting to also FIND OUT (not only in AZ, but nationwide) if the biggest rate of foreclosures are for these type of “loans to the illegal”…. something tells me NOT TRUE. I actually read some stats indicating otherwise, that actually amongst the foreclosures, this group had the LEAST number of those.
It will be really interesting to check out your findings…
Well, once it starts it’ll never ends!!
Next will be …show me you id before you apply a credit card or u buy a dvd,……and so and so,,,,,, until this economy halt to a ……….!!!!!
This not the time to cut demand by requesting meaningless documents for a home loan.
Only responsible people (legals/illegals) who choose to invest in the U.S by actually buying a home are honest and should be discouraged.
This housing market needs the largest possible pool of buyers!
It sounds like the inherent assumption being made is that one must be a US resident/citizen to purchase property in the US. This is not true. Foreign investors can buy property in the US legally. In other words, being a US citizen or legal resident is NOT required to buy property in the US. So unless realtors and loan officers are going to be required to study immigration law I don’t see how we can realistically expect them to know if a buyer is illegally in the US.
YankeeSpringer… your question/comment is indicative of the common mis-perception of the role of loan officers and mortgage brokers. I happen to own a mortgage brokerage. If our lenders do not require proof of citizenship, it would make no sense to ask for it from our borrowers. I’m not even sure it is legal to request it. It is beyond fiscal responsibility… it is a question of legal and ethical implications.
But for me personally, I take no issue if it was to become law. I certainly disagree with MICA2000 who states that such documentation is meaningless. And whether or not such a bill is written, I certainly wouldn’t want my representative to vote on it based on the state of the real estate market… that’s part of the problem… voting with their wallets instead of their heads.
DHeiny is absolutely right, Money is money, these people got their loans with and ITIN and it was all legal. What about people buying vacation homes? Are they going to make it illegal for a German to buy a beach house here if they want? This is all our fault for failing to truly clamp down on employers of illegal immigrants.
I’ve been in lending for 20 years and there have always been lenders who specifically write on their rate sheet matrixes “foreign national okay”. Most lenders did not have a problem with lending to foreigners because they know that immigrants work hard and take care of their obligations. It wasn’t until the racists in Arizona decided to turn their state into a modern day Nazi Germany that many immigrants decided to walk away from their homes.
Now you people blame the immigrant for defaulting on a loan when it is your racist legislation which is forcing them to leave? You want them to work for slave wages and then to add insult to injury, you incompetents want to use them as a scapegoat for your failures! You’re so pathetic.
I sincerely hope this legislation goes into effect. The cowards in AZ will be brought to their knees when America boycotts them.
We’ll see just how important AZ’s principles are to them when they realize that they have made a huge mistake and Phoenix is turned into a ghost town.
Riverside, NJ and Hazelton, PA are case studies in what happens when racists get their wish to have all non-whites chased out of town. Businesses and homes were boarded up and business owners went bankrupt because nobody wanted to buy a business in a dying town.
I cant wait to see Phoenix as a ghost town…
(and I realize you’re going to censor me again Bryan, just as you have on many of my other posts…because you don’t have the guts to post my opinion.)
go ahead and prove me right.
Jay, I have to agree with you. The verbiage is a bit harsh, but your point has quite a bit of validity. No matter how you look at it, the law goes too far. When law enforcement is reluctant to enforce a law as they are this one, you know the law has serious flaws.
Jay,
Read the bill instead making idiot comments not backed by facts. Read the Federal laws if you want to see profiling, sneak into Mexico if you want to spend time in a Mexican prison.
The bill 1070 is fair, applies to all illegals, what part of illegal is so hard to understand. We did not have as many people invade Europe to defeat the Nazis, as are invading the United States. What part of invasion is so hard to understand?
My Mother-in-Law escaped the Nazi, people whom use that example are really ignorant of what they are talking about, nothing like having one of the actual victims for a family member to know and understand the differences!
You boycott all you want, most of the United States is behind the bill and business is actually picking up because of the bill and the very effective BUYCOTT being run by sensible people in Arizona which is attracting more business than the press want to report.
Despite what was reported by some publications which want the bill to fail, the marches against it have been very poorly attended, not even 5,000 people in the biggest protest march. I have been in very large crowds and have helped put on events, 5,000 is being gracious and the police confirm the number.
This bill will most likely increase foreclosures, but not that much in my opinion because most of the illegals have purchased lower priced homes in the more run down neighborhoods, which already had a higher foreclosure rate than some areas. This means while some additional foreclosures may happen because of the bill, the dollar impact on Arizona will not be very much additional to our large budget problems here, most left over by that moron Napalitono.
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