Whether these loans continue to hold up is questionable as a number of factors can affect their viability, including a possible government crackdown on illegal workers and a slowdown in job prospects for undocumented laborers, which could threaten the ability of these borrowers to keep paying. In addition, there are signs of a slowdown as some lenders have raised the interest rates they charge.
The ITIN mortgages represent a fraction of the $2.8 trillion mortgage market, but according to the “Wall Street Journal” article, they are a bright spot in today's gloomy mortgage industry.
For loans more than 90 days in arrears, ITIN mortgages have a delinquency rate of about 0.5%, according to independent estimates. That compares with 1% for prime mortgages and 9.3% for sub-prime mortgages extended to those with spotty credit histories.
Many lenders who have sought this business remain bullish.
"Our default level is almost zero," says Scott Hastings, director of marketing for Citizens Home Loan Inc., a Charlotte, N.C.-based lender that is active in 33 states. The bank has been originating ITIN mortgages for almost two years, and the loans now make up about 20% of the institution's mortgage business. "It's an absolutely promising market. These Hispanic families will pay their mortgage before anything else."
Undocumented workers normally use an invalid Social Security number to obtain work. But they can pay taxes with a nine-digit alternative number that the Internal Revenue Service started issuing in 1997 to foreigners who aren't eligible for a Social Security number.
The objective is to encourage all workers in the U.S. to file an income-tax return, regardless of immigration status. Banks, which normally use Social Security numbers to report income to the government, began accepting the individual taxpayer identification number from mortgage applicants in 2000.
ITIN-mortgage applicants are largely blue-collar, illegal-immigrant workers with only modest incomes. But they undergo more scrutiny -- and provide more documentation -- than candidates for stated-income mortgages and other sub-prime loans, for example. Most banks also ask applicants to show they have been filing taxes -- with an ITIN -- for at least two years.