A couple of months ago, HUD rushed to defend itself against claims it was denying mortgages to DACA Dreamers. There were other claims online accusing HUD, the FHA, Fannie Mae and others that DACA recipients were no longer eligible for mortgage approval. In late 2018 Housing wire investigation and reports led to a Buzzfeed exposé, raising the question of whether there had been a DACA policy change.
DACA (Deferred action for Childhood Arrivals) is an American immigration policy that allows some individuals, brought to the country illegally as children to receive a renewable two-year period of deferred action from deportation and to receive a green card. DACA recipients were eligible for FHA insurance under certain circumstances, but the Buzzfeed brought light to an abhorrent situation, where FHA seemed to have quietly ceased to approve DACA applicants.
Further research found several other agencies going on record with announments of policy updates. The Connecticut Housing Finance Agency published a lender bulletin stating “FHA now stipulates that Non-Permanent Resident Alien Guidelines require lawful residence for FHA loans. Although Deferred Action for Childhood Arrivals (DACA) immigrants are in the United States legally, under the new administration they are not considered to have lawful residency.” Idaho Housing and Finance Association published a similar notice stating, “Effective immediately, Idaho Housing will not allow loans to be locked for DACA borrowers…”
Multiple entities were looking for indemnification from the GSE’s that they would not be held liable for DACA recipients whose immigration status changed.
Fannie Mae, in response to a flurry of feedback on DACA policy questions, insisted “Fannie Mae’s selling guide states that lenders, not Fannie Mae, determine whether an individual is legally present, and decide upon the documentation used to make that determination.” Frustrated with the hullaballoo, Fannie Mae issued a declaration that it supports mortgages for DACA recipients aka Dreamers. Fannie Mae explained that it has not changed its existing policies, but was issuing the bulletin to provide “additional guidance to help lenders determine eligibility for non-U.S. citizen borrowers”. Those guidelines require a borrower to document his eligibility to work in U.S. (current green card) and to provide proof of income. Said Borrower is not required to prove income continuity for most employment income types including base pay, overtime, commission etc.)
If that is confusing, look at it this way: The borrower must show he or she has permission to work in U.S. (green card). The borrower must also show he or she does work in U.S and may need to show a consistent two year history of income, but is not required to prove eligibility to earn it two years into the future. Once those criteria are met, the borrower’s loan should be eligible to be purchased by Fannie Mae. (lenders package up groups of mortgages and sell them to Fannie Mae or Freddie Mac on the secondary market.) Fannie Mae pointed out that individual borrower situations vary, and Fannie Mae (or FNMA) has the discretion to deny specific borrowers due to lending risk.
That is traditional policy at Fannie Mae, but FNMA also stated it will support lenders if the borrower’s status changes. “For loans that meet our documentation and eligibility requirements, we will not seek a loan repurchase solely based on a change in the borrower’s immigration status after closing.” (Repurchase refers to the lender being forced to refund Fannie Mae for the bad loan, or “repurchasing” that loan.)
There are wildly varied approaches and uncertainty, and no one wants to get caught with the hot potato if the borrower is deported. FHA is not guaranteeing those mortgages, but FNMA is promising lenders no buybacks for change of immigration status on DACA borrowers. Several lenders, however, continue to treat DACA borrowers as ineligible for any of their loan products.