California could allow undocumented residents to qualify for new state-backed home loan program
A California lawmaker is leading the charge to make undocumented residents eligible for a popular state-backed home loan program, weeks before it gives out another $250 million in down payment assistance.
Assemblymember Joaquin Arambula, D-Fresno, introduced legislation, Assembly Bill 1840, last month to expand eligibility for the California Dream for All program, which uses a “shared appreciation” lending model. While undocumented immigrants have bought homes using lending programs that bypass the need for a Social Security number for years, the bill would make home buying more accessible for many.
“The program is crucial in making homeownership more attainable and strengthening the economic development and quality of life for all our communities,” Arambula said in a statement to The Sacramento Bee.
The Dream for All Program, which launched last year, intended to help address California’s ethnic and racial wealth gap. It provides homebuyers with money towards a down payment — 20% of the home’s purchase price or up to $150,000. The homeowner is expected to pay back the loan and a share of the appreciation value, whenever it sells again.
But last year, the program may have worked too well.
The $300 million in loans were claimed in just 11 days, which raised concerns that the program was helping people who could already afford it. This led to the California Housing Finance Agency and the Legislature to push for changes, said CalHFA spokesperson Eric Johnson.
“We really want to make sure that funds for this round are distributed equitably,” Johnson said.
This year, the agency will replace its first-come, first-served model with a lottery and has a new rule that requires the homebuyer to be a first-generation homebuyer, meaning neither the individual nor their parents could have owned a home. The program has also lowered its income eligibility threshold from 150% of the county’s median area to 120%.
In Sacramento County, the income threshold is $180,000.
Applications have already opened and allow time for homebuyers to find a state-approved lender before the lottery opens in early April. Buyers will then have a month to submit their applications.
Johnson said the agency could not comment on Arambula’s proposed legislation.
The CalHFA and Dream for All handbooks say each borrower must be a citizen, “other national of the United States or a qualified alien.”
“There has to be some sort of legal document that says they are allowed to be here,” said Kristina Hernandez, a state-approved lender with Homeowners Financial Group in Stockton.
Home buying for the undocumented
Across the country, lenders have worked with undocumented homebuyers for years as the U.S. does not restrict foreigners from buying real estate. Most use an individual tax identification number, or ITIN.
Around 22% of the undocumented population in California, or 604,000 people, owned homes in 2019, according to the Migration Policy Institute. Nationwide, undocumented homeowners are estimated to contribute $3.6 billion in property taxes each year.
ITINs were created by the IRS to ensure foreign nationals and other individuals pay taxes even if they do not have a Social Security number. The numbers can also be used to open bank accounts and qualify for a mortgage on a home.
But the down payments and interest rates will often be higher for these applicants because they do not have the typical credit lines of U.S. citizens. These increased payments become the major hurdles for many ITIN applicants to buy homes, said Franco Garcia, a Sacramento realtor.
“If there was a less burdensome entry point, I think many more people, who want to buy, would buy,” Garcia said.
Arambula’s legislation may have a stronger possibility of passing in comparison to other bills aimed at helping undocumented residents, given that it would not affect the state budget or worsen the deficit. In the last two years, Gov. Gavin Newsom has vetoed legislation that would have provided some undocumented residents unemployment insurance and cash assistance due to financial costs.
