The Department of Housing and Urban Development, Federal Housing Administration, and Department of Agriculture told HousingWire earlier this week that their policies have not changed in regard to mortgages to Deferred Action for Childhood Arrivals recipients.
But multiple lenders and mortgage industry participants tell HousingWire that HUD seems to be saying one thing and doing another.
In the wake of HousingWire’s coverage of whether the government is backing mortgages for DACA recipients, also called Dreamers, several in the lending industry have reached out to say they’ve received a direct statement from a HUD representative stating that the Dreamers are no longer eligible for FHA mortgages.
One lender passed along a message that appears to be from a HUD employee who states that C-33 visa holders (Dreamers) do not meet FHA guidelines because DACA status does not grant legal residency in the U.S.
Another lender told HousingWire that they contacted FHA directly and were told, point blank, that DACA borrowers are not eligible for a FHA mortgages.
Yet another lender asked the FHA’s customer service team whether DACA borrowers are eligible for an FHA mortgage. The response from the FHA: “NO we do no(t) lend to DACA borrowers.”
Another lender told HousingWire that they’ve chosen to stop FHA lending for Dreamers because they (along with others) have collectively interpreted HUD’s guidance to mean the FHA will not back mortgages for Dreamers.
Others say they’ve received mixed messages from HUD about FHA lending for Dreamers.
And therein lies the rub.
By not declaring definitively one way or the other on whether Dreamers are eligible for FHA mortgages, HUD is allowing that mystery to serve as their answer.
By not providing a direct answer, HUD is leaving it to the mortgage industry to interpret what they are supposed to do about it. Basically, it appears that HUD wants things to be ambiguous, thereby discouraging all parties from writing loans for DACA borrowers for fear that they won’t be able to do anything with the loans in the secondary market.
And that’s leading to lenders not writing mortgages for DACA borrowers because they don’t want to be on the hook if/when the FHA denies the mortgage.
One lender tells HousingWire that “no one” in the lending industry is doing FHA loans for DACA borrowers because of that confusion.
According to that lender, only one investor they work with is willing to buy C-33 loans right now, but only if they are conventional loans, i.e. those backed by Fannie Mae or Freddie Mac.
Outside of that, the lender says that lenders are simply not doing FHA mortgages for Dreamers. The risk is just too great.
In fact, one Dreamer borrower reached out to HousingWire and said that they can’t get their loan approved because every lender they’ve spoken to is “scared” to move forward with an FHA loan for them.
Part of the confusion on whether the FHA will approve a Dreamer’s mortgage seems to coming from the issue of whether a Dreamer is a “legal resident” of the U.S. or “legally present” in the U.S., a status that is determined by the U.S. Citizenship and Immigration Services office within the Department of Homeland Security.
As HUD said in its letter to Senate Democrats:
“The Department wants to be very clear that it has not implemented any policy changes during the current Administration, either formal or informal, with respect to FHA eligibility requirements for Deferred Action for Childhood Arrivals (DACA) recipients. HUD has longstanding policy regarding eligibility for non-U.S. citizens without lawful residency. Those policies have not been altered.”
According to HUD’s letter, “non-U.S. citizens without lawful residency in the U.S. are not eligible for FHA-insured mortgages.”
But, as HousingWire’s own Ask the Underwriter, Dani Hernandez previously detailed, DACA recipients were previously eligible for FHA insurance under certain circumstances. One of those conditions is whether they were legally allowed to work in the U.S., as determined by the USCIS.
HUD detailed as much in a response to a congressional inquiry (emphasis added by HousingWire):
The (Single Family Housing Policy) Handbook also includes instruction on eligibility requirements for applicants seeking FHA-insured financing. While it indicates that U.S. citizenship is not required for mortgage eligibility, it also clearly articulates residency requirements for prospective borrowers who are not U.S. citizens. For instance, a prospective borrower with lawful permanent resident alien status may be eligible for FHA-insured financing—the mortgage file “must include evidence of the permanent residency,” which is provided by the U.S. Citizenship and Immigration Services within the Department of Homeland Security. The Handbook also provides eligibility requirements for prospective borrowers who are non-permanent resident aliens.
When asked by HousingWire about its policies on Dreamers, USCIS referred HousingWire to its policies from February 2018, which state that: “USCIS is not accepting requests from individuals who have never before been granted deferred action under DACA. Due to federal court orders on Jan. 9, 2018 and Feb. 13, 2018, USCIS has resumed accepting requests to renew a grant of deferred action under DACA.”
As for its rules’ impact on the mortgage business, USCIS referred HousingWire back to HUD.
The bottom line appears to be that no one really seems to truly know what is going on, and that is leading to a lot of confusion, and therefore no FHA lending to Dreamers.
One lender described HUD’s answers to HousingWire’s questions as the perfect D.C. political speak, basically playing both sides and not really provide an answer one way or the other. HUD is not being dishonest, but its not exactly telling the whole truth either.
And by doing that, the mortgage industry and Dreamers are left in the lurch. But perhaps that’s how HUD under the Trump administration wants it.