Monday - August 08, 2005

Most Outrageous Item Of The Day

What do greedy US bankers and illegal immigrants have in common? The mortgage on a new home, it seems. Several US banks have started giving home loans to illegal immigrants. Classic line: “break our laws and we’ll reward you with a home” ....

NEW YORK (CNN/Money) - The banking industry is opening its doors to a controversial new market: illegal immigrants. Despite heated political debate in Washington over illegal immigration in the United States, an increasing number of banks are seeing an untapped resource for growing their own revenue stream and contend that providing undocumented residents with mortgages will help revitalize local communities. It’s a win-win situation, they say. But skeptics worry about the message these home loans send to illegal immigrants: break our laws and we’ll reward you with a home.

“It’s institutionalizing illegality,” said Marti Dinerstein, president of Immigration Matters, a New York-based think tank. “Now there’s no distinction being made between the people that follow all the rules and those who break our laws by entering the country or overstaying their visas.” Dinerstein also worried that lack of knowledge on the part of illegal immigrants could pave the way for abuse in the form of predatory lending. But advocates of the practice say the benefits outweigh any potential downside. According to the Center for Immigration Studies, one million illegal immigrants cross the U.S. borders every year. About 500,000 illegal immigrants lose that status every year either by getting legitimate green cards or returning to their native countries. That leaves a 500,000 annual net increase of illegal immigrants – a market that has unmet banking needs.

“This is a huge untapped market with people that live and work in this country and are capable of buying homes to realize the American dream,” said Chan Peterson, executive vice president and head of community banking at Banco Popular, one of the earliest banks to enter this field. He added that there’s a common misperception that illegal immigrants will be more likely to default on their loans than a documented resident. But the company has found that there is no higher rate of default in this loan portfolio than any other market the company serves. “There’s a pride that comes with people moving from renting to owning and we’ve found that these borrowers are driven to hang on to their homes,” Peterson said.

Bill Schumer, vice president of product development at Fifth Third Mortgage Co., a unit of Fifth Third Bancorp. (Research), said the company entered the marketplace due to the belief that providing these low-to-moderate income loans will help revitalize communities in the United States, as borrowers buy more run-down properties and rebuild. He added that by introducing this segment of the population to home ownership education, they are also building a foundation to cross-sell their other products. “We’ve been at this program for the last 8 or 9 months and 68 percent of these borrowers have established three or more banking services with us,” he said.

While Schumer wasn’t willing to disclose how many of mortgages the company provides, he said the product has been well received in the marketplace and is already 4 percent above the level the bank had targeted for the year. And it’s growing. That’s not surprising, said Alenka Grealish, manager of the banking group at Celent, an independent research and consulting firm. Grealish said while the mortgage banking business in the U.S. continues to be red hot, veterans know that it’s a highly cyclical industry that moves with interest rate trends. She said that forward-looking banks are already considering how to grow their business when the pipeline of traditional mortgages begins to dry up. “Illegal immigrants are here to stay and banks are recognizing that,” she said. “If you do a niche market well and know how to price it, banks can have some attractive margins.”

Posted by The Skipper     on 08/08/2005 at 12:52 PM   
Filed Under: • Illegal-Aliens and Immigration • Outrageous •  
• Comments (7) • Trackbacks(0)  Permalink •  

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