ITIN borrowers represent an exciting, untapped market. Here's why brokers should embrace this borrower base
For mortgage brokers, finding an underserved segment of the market can feel like striking gold. In mortgage lending, one niche that often flies under the radar is the Individual Taxpayer Identification Number (ITIN) borrower.
These individuals, who use ITINs instead of Social Security numbers, are usually active participants in the US economy, often building businesses and saving for homeownership. However, misconceptions around risk levels and a general confusion around ITIN borrowing has prevented many brokers from effectively tapping into this market.
Robert Senko (pictured), president of ACC Mortgage, says this is a missed opportunity for brokers and lenders alike. Tapping into this market can not only boost business growth, but also help build stronger and more stable communities.
Who are ITIN borrowers?
An ITIN is issued by the IRS to individuals who need to pay taxes, but are not eligible for a Social Security number. Some may have entered the country legally but overstayed their visas, while others may have crossed borders illegally. Regardless of their immigration status, Senko notes that many of these individuals are still active participants in the economy, with many owning their own businesses in the trades and hospitality sectors.
“The key thing is that they’re here,” Senko explained. “They’re living in the community, they’re providing jobs and services, and they may want to buy a home. Whatever your political affiliation, I believe it’s important to create stable communities and homes for these working families.”
One of the common points of confusion is the difference between ITIN borrowers and foreign nationals. While foreign nationals often invest in US properties without intending to live in them, ITIN borrowers are usually looking to buy a primary residence. Senko noted that despite this distinction, ITIN borrowers don’t tend to represent any additional level of complexity.
“We treat ITIN borrowers just as we’d treat anyone else,” he said.
“We look at their credit, income, and their ability to repay (ATR), and we give them affordable financing options.”
The politics of ITIN lending
One of the biggest challenges surrounding ITIN lending is the political debate over immigration. With an election imminent, there is some concern around changes in policy that could remove a large percentage of this borrower base.
The mortgage industry also tends to be cautious of the risk levels that ITIN borrowers represent – however, Senko highlighted that, in many cases, ITIN lending has actually proven to be less risky compared to ‘traditional’ lending.
“What separates ACC Mortgage is that we’ve perfected this process, and we’re one of the larger ITIN lenders in the market,” he explained.
“Are they risky? I don’t believe so. Our performance for these loans has been extraordinary, even better than the traditional borrower loans.”
Senko explained that this strong performance has come down to several factors. First, ITIN households typically have multiple sources of repayment that may not show up on an application. They also don’t tend to borrow large amounts of money, and they pay the debt off quickly.
“Lots of people are able to pool funds and come up with a significant down payment – we go as high as 85% on these products,” Senko added. “Even through the COVID-19 years when there was a dip in market performance, these loans still performed very well.”
Reaching ITIN borrowers
For brokers looking to connect with ITIN borrowers, it’s all about using the skills you have to build relationships with communities. States such as California, Texas, New York and New Jersey all have large immigrant populations, and offering ITIN products can be a great way for brokers to expand their market reach.
“Work within your communities,” Senko said.
“If you have the ability to speak Spanish, for example, approach those communities and real estate agents to offer this product. It’s not widely known that these programs exist, so it’s a great approach to be able to offer that expertise in the market.”
“Ultimately, these folks are sending tax returns to the US government, so it’s not like they’re hiding,” Senko concluded.
“I think the environment will be more stringent for new immigrants coming in. But for those who are here, I think there will be a 10-20 year runway for them to achieve citizenship. I would encourage the industry to not demonize that population, but rather to embrace them as a consumer and borrower. And when they want to do that loan – call ACC Mortgage!”
