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Saturday, May 22, 2004

MSNBC - State's immigrant loan program challenged

MSNBC - State's immigrant loan program challenged

By Michael Muckian
The Business Journal of Milwaukee
Updated: 8:00 p.m. ET May 23, 2004A Republican assemblyman is challenging the Wisconsin Housing & Economic Development Authority's pilot program to provide undocumented immigrants with affordable home mortgages.

State Rep. Glenn Grothman (R-West Bend) wants WHEDA to end the program as of the agency's May 21 board meeting or face the threat of legislation curtailing its ability to provide mortgage loans to undocumented immigrants. The move by Grothman, Assembly majority caucus vice chairman since 1999, comes at a time when financial services providers nationwide are working to remove barriers to such loans.

In late April, WHEDA started the program that provides mortgage loans to undocumented immigrants through three Milwaukee banks and one bank in Madison. The loans use individual taxpayer identification numbers, rather than Social Security numbers for borrower identification.

The program targets recently arrived Hispanics who are not U.S. citizens and lack valid Social Security numbers.

The banks have been writing loans to undocumented workers for several years, keeping the loans within their own portfolios. WHEDA's involvement gives the program considerably more clout, offering loans through participating banks at more competitive interest rates, thus increasing the number of potential borrowers. Rates for WHEDA loans, offered at a 5.75 interest rate on May 19, stand to be one percentage point or more less than similar loans banks provide for undocumented workers.

The WHEDA program capitalizes on population trends that show a rapid rise in immigrants, both documented and undocumented, said Antonio Riley, WHEDA's executive director. WHEDA research shows one-third of the work force nationwide consists of immigrant workers with tax identification rather than Social Security numbers, which obligate them to pay income taxes without getting social benefits, he said.

"Do we want them to be poor without assets and fall victim to predatory lenders?" he said.

WHEDA hasn't yet made any such loans, but several are in the pipeline, Riley said. Since many borrowers are likely to be immigrants unfamiliar with the U.S. financial system, the agency has added financial literacy to its regular monthly homebuyer seminars as part of the new program, he said.

WHEDA's involvement falls in line with other government agencies, including the Federal Deposit Insurance Corp., which supports individual taxpayer ID loans, said Michael Frias, a spokesman with the FDIC's Chicago office. The Department of Housing and Urban Development also has proposed legislation requiring Fannie Mae and Freddie Mac to accept a higher percentage of loans from low-income borrowers. The two quasi-government mortgage agencies are considering taxpayer ID loans to help meet this requirement, he said.

Despite such trends, Grothman wants WHEDA to cease writing taxpayer ID loans altogether.

"We have honest people waiting years to become citizens, hard-working immigration employees protecting our borders and we're going to give low-interest loans to illegals," he said.

WHEDA board chairman Perry Armstrong, appointed by Gov. Jim Doyle, agreed with Grothman in principle, but reserved judgment of the program until finding out more at the May 21 meeting.

"This is just a pilot program and doesn't yet have a permanent place in WHEDA's arsenal," said Armstrong, chief executive officer of Preferred Title L.L.C., a Madison title insurance company.

WHEDA board member Geoff Hurtado, a first-generation Mexican-American and owner of Hurtado Consulting L.L.C., Milwaukee, said the agency is accomplishing its mission through immigrant loans, which are offered at the same rate as regular WHEDA loans.

"It's consistent with WHEDA's intent to provide a hand up rather than a handout," he said.

Grothman planned to speak at WHEDA's May 21 meeting in Madison.

Bank list
WHEDA program participants include Mitchell Bank, Milwaukee; Guaranty Bank, Brown Deer; North Shore Bank, Brookfield; and First Federal Capital Corp., La Crosse, which was recently purchased by Associated Banc-Corp, Green Bay.

"No decision has been made as to whether Associated will participate in the program," said Associated spokesman Jon Drayna.

Area bank executives involved in WHEDA's pilot said they'll continue granting loans if the agency is forced to abandon the program.

"If WHEDA backs out, we simply would have less capacity to make the loans," said James Maloney, chairman of Mitchell Bank.

Mitchell, which serves Milwaukee's largely Hispanic near south side, has made immigrant loans for the past two years. Mitchell currently holds 35 mortgages worth $2 million on its books, said Maloney. The bank can go as high as $5 million worth of such mortgages before capping the program due to underwriting requirements.

North Shore Bank has 30 immigrant loans worth an estimated $2 million, said Don Cohen, North Shore's vice president of community lending. Under WHEDA, the bank expects that amount to increase to $1 million in loans per month, he said.

Grothman's opposition to the program focuses specifically on WHEDA's involvement and the legislator won't initially address the legality of the loans themselves.

"I wouldn't necessarily want to restrict banks from making immigrant loans, but it's definitely something to look into," he said.

Legislative resistance to immigrant loans at any level runs the risk of undermining efforts to strengthen and develop low-income neighborhoods that are traditional homes to immigrants, said Maria Monreal-Cameron, president and chief executive officer of the Hispanic Chamber of Commerce Wisconsin, Milwaukee.

"I don't understand why there's always such strong opposition to anything that will help a new wave of immigrants," Monreal-Cameron said. "I think WHEDA is to be applauded for its creative solution."

Lack of understanding may be driving resistance to such programs, said North Shore's Cohen.

"If legislators had all the information, they wouldn't oppose the program," he said.

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