Thursday, October 23, 2008

Stiffling Housing Demand

If this was KPC, the title of this post would be something like "Housing Demand: yer doin' it wrong!"

Anyway, many have suggested that allowing more immigration to help prop up housing prices as a possibility to help slow the spread of foreclosures. However, according to Miriam Jordan of the WSJ the U.S. is doing precisely the opposite (Hat Tip to Philippe Legrain for the article pointer):
Dubbed ITIN mortgages, the loans that made homeownership a reality for thousands of undocumented workers have withered -- although not because they underperformed.

The loan program highlights contradictions in U.S. polices toward illegal immigrants. Even as the Department of Homeland Security sought to deport them, the Federal Deposit Insurance Corp. goaded banks and credit unions to bring undocumented immigrants into mainstream banking if they could prove they had steady income and were creditworthy. Beginning in 2003, when banks and credit unions first offered mortgages to undocumented immigrants, the small segment blossomed. The mortgages performed better than some others, partly because of stringent lending criteria and because they usually had fixed rates over a period of time.
But amid the crackdown on illegal immigration and the economic slowdown, the market for immigrants who boast the alternative nine-digit taxpayer ID is dying.
"If you want to buy a house and you're here without papers, now you can forget it," says Jesus Benitez, a real-estate agent who caters to Hispanics in Brooklyn.
Bank of Bartlett, a small bank that serves the greater Memphis area, endured the "political heat," says John Byrd, president of Bartlett Mortgages, a unit of the Tennessee bank. "We felt we were doing the right thing; these people had been working here many years and paying taxes." All told, the small bank originated about $20 million in ITIN mortgages over four years, each worth about $100,000. Less than 5% of Bank of Bartlett's ITIN loans are delinquent. Nationally, for loans more than 90 days in arrears, ITIN mortgages had a delinquency rate of about 0.5% last year, compared with 9.3% for subprime mortgages, according to independent estimates.
Unwilling to shoulder the risk alone, Bank of Bartlett and others began withdrawing from the ITIN home-loan market -- though they continue to service their current clients.

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