March 1, 2009
As the world as we knew it imploded in recent months — after several years of writing on the wall for any Democrat, Republican, business or individual who chose to read it (not many did) — little reporting has been done on one aspect of the mortgage meltdown: Where do as many as 38 million illegal immigrants fit into the new reality?
In 2006, writing for Californians for Population Stabilization, I talked about how the housing boom was a major component of unsustainable debt creation that was luring in hundreds of thousands of illegal workers to the United States and creating the follow-up bubble to its dot-com predecessor.
The op-ed went on to point out the increasing numbers of homeowners taking cash out of their homes, the weakening of lending standards through creative financing for previously unqualified buyers, and the highly speculative nature of the evolving housing market.
With housing being the biggest jobs driver, the piece stated, it was no surprise that some 20 percent of the estimated 7.2 million illegal labor force worked in some area of construction. A bust in the building boom most certainly would impact the estimated 1 million illegals working in that industry I speculated. Many of these illegal workers would have purchased homes, as federal law permitted banks to offer mortgages to illegal aliens. No Social Security number was required. Starting in 2003, a potential buyer need only have an individual tax identification number (ITIN), which created a mortgage market estimated to be $3 billion — one now fading away due to the current environment and customer criticism of ITIN mortgages.
Exactly how many of these immigrant workers jumped into the housing market by way of loose lending, no-doc loans or even fraudulent conveyances is not yet known (expect more on this though, as accountability is demanded by angry Americans of the U.S. government’s multiple bailouts), but there are numerous anecdotal accounts.
One report was of an immigrant (immigration status unclear) who began working in Washington in 2000, ultimately earning $32 an hour as a stonemason. When work dried up in 2007, he was unable to make home payments on his three mortgages.
Yes, that was three mortgages.
Few math skills are needed to understand that three mortgages on $32 an hour don’t add up under even the most lax of mortgage lending schemes. There was wild speculation in that speculation perhaps?
Beyond the anecdotal, Kenneth M. Donohue, inspector general, Office of Inspector General, U.S. Department of Housing and Urban Development (HUD), in Washington, D.C., wrote last year of "seeing a trend with organized groups in some parts of the country to recruit illegal aliens to purchase FHA-insured homes." Illegal aliens are not allowed to buy FHA-insured homes. Mr. Donohue said that "unscrupulous mortgage professionals" would help illegals obtain fraudulent Social Security numbers and other identifying documents.
Indeed, the bust came, and we continue seeing the painful fallout from all the illusory wealth created. Last summer, the Washington-based Pew Hispanic Center reported that Latino workers had lost nearly 250,000 jobs in construction, and foreign-born workers were hardest hit. According to federal data, since a September 2006 peak, the construction industry has lost a total of 663,000 jobs.
That number likely has grown as employment has continued to deteriorate. Here in California, unemployment hit a record 9.3 percent in December. Looking at some counties, the outlook is even gloomier. For instance, Fresno County reported 12 percent unemployment, with the biggest job losses in construction.
While there’s some evidence of a few illegal aliens self-deporting in the sour economy, it’s more likely that workers who arrive largely from Mexico and South American countries will stay rather than return home to situations worse than here. A recent report puts Mexico on the same level as Pakistan for the potential of rapid and sudden collapse — not exactly "come home, the welcome mat is out."
So where do we go from here, now that the prime economic model for our country in recent years has crashed? No more building and selling homes to each other — and reselling them in the "flipper" mode for extreme returns — with Wall Street creating clever ways to slice and dice packaged loans for more extreme returns (there’s a Milken born every decade).
Given "an overhang of new homes and unsold homes that have to be addressed," Tobias Levkovich, the chief U.S. equity strategist with Citi, believes that "maybe we have to relax certain immigration policies to address that."
This brilliant idea essentially to try and re-inflate the housing bubble on the backs of immigrants comes from what’s fundamentally a failed bank that’s thus far received $45 billion in government bailout bucks and guarantees of $300 billion. If the banksters can’t run their businesses, it’s doubtful we want to look to them for policy ideas. But, it’s looking like we will.
Between corporate America (as personified by a Levokovich) and the new administration — whose stance is to increase the number of legal immigrants and legalize most of those already here illegally — taxpayers will be footing the bill for the housing fallout, including the component related to illegal aliens, through seemingly endless government bailout schemes and the new economic stimulus plan.
We’ll be helping put illegal alien construction workers back to work. too. On Feb. 11, the conference committee on the economic stimulus package met to reconcile differences between the House and Senate versions. Provisions that would have protected American and legal workers — including requiring that any businesses receiving stimulus funds use E-Verify (an online system of the Department of Homeland Security that provides an easy way for employers to ensure they’re hiring a legal workforce) — were removed.
In other words, some of your stimulus dollars will go toward creating jobs that may go to illegal workers at the expense of American workers. That’s the new reality.
The author is a senior writing fellow for Californians for Population Stabilization in Santa Barbara.