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Itin No Longer Substitute For Social Security
In the wake of increasing foreclosures that have sprung up in virtually every state over the past year and a half since the housing boom became a correction, government and mortgage industry officials are taking steps to curb the future rise of foreclosures, which not only negatively impact the mortgage and housing industries, but the overall United States economy as well.
The main step that is being taken to prevent foreclosures is stricter underwriting guidelines. Many mortgage origination companies have been scrutinized for allowing people to borrow nontraditional mortgages that do not typically qualify.
A step towards ensuring tighter underwriting guidelines is to eliminate mortgage borrowing to people without Social Security numbers even if they have an ITIN.
The article, “Legislation Seeks to Ban Mortgages for Home Buyers Without Social Security Numbers,” written February 26, 2007 by Kenneth R. Harney and posted in realty Times explains how a new proposal will eliminate ITINs as a proper method of mortgage identification despite their strong record of quality borrowers.
“The IRS provides ITINs to immigrant workers who are earning income, want to pay federal taxes, but do not yet have a Social Security card. Growing numbers of banks and mortgage companies are using ITINs as part of their programs to assist ‘emerging market’ borrowers who have solid and stable incomes, but non-traditional credit and documentation.”
According to MGIC Investment Corp., ITIN-based mortgages are currently issued in 40 states, primarily by smaller banks and lenders. Although on first glance, borrowing a mortgage without a Social Security number and only with an ITIN issued from a small bank may look risky, its results should not be discarded.
“Geoffrey F. Cooper, director of emerging markets for MGIC, says home buyers using ITIN-based mortgages perform exceptionally well – ‘like A-credit borrowers’
-- in part
because MGIC's underwriting standards are strict. Borrowers must present
documentation of two years of income tax filings, two years of stable
employment and residence, and other evidence that they are good credit
risks.”
But it appears that none of this will matter if a new
bill produced by Rep. John T. Doolittle (R-Calif.) that would ban ITINs
as an acceptable form of identification for mortgage lending is approved.
“According
to Doolittle, undocumented immigrants often are here illegally, and
the ‘government should not be in the business of creating incentives
to encourage illegal behavior. Nor should companies be permitted to
reward those individuals in clear violation of our laws.’”
But
at the same time, most ITINs are good mortgage borrowers and do not
default and end in foreclosure nearly as often as other mortgage borrowers
with Social Security numbers. ITIN mortgage borrowers have supported
local housing markets over the past several years and Doolittle’s proposed
bill, which is receiving support, could affect the slumping housing
market to continue its negative outlook.
“Tim Sandos, president
and CEO of the National Association of Hispanic Real Estate Professionals,
called Doolittle's plan ‘the equivalent of trying to drive a tack with
a sledge hammer.’ Most of the 7 to 8 million potential home purchasers
affected by the bill, said Sandos, are immigrants in some phase of
the U.S. citizenship process.” |
