(The Center Square) – One of the arguments used by the Republican Party of Texas and members of the Texas GOP congressional delegation calling for an investigation into a property development north of Houston is the legal practice of owner-financed lending.
A recently passed party resolution argues the development Colony Ridge must be investigated for allowing “illegal aliens to obtain loans to purchase land using Individual Tax ID Numbers (ITINs) instead of Social Security Numbers.” A Republican congressional delegation letter to the governor states that the company “markets owner-financed loans with no credit checks or proof of legal residency, making the location an optimal haven for illegal aliens.”
According to state law, it’s legal for companies to offer owner-financed loans and for non-citizens to purchase property in Texas, Leslie Lerner, a commissioner with the Texas Real Estate Commission, told The Center Square. It is also illegal for a realtor, title company or lender, or anyone else in the real estate industry, to not work with a client solely because of their nationality or race, according to the Fair Housing Act.
The FHA “protects people from discrimination when they are renting or buying a home, getting a mortgage, seeking housing assistance, or engaging in other housing-related activities,” the U.S. Department of Housing and Urban Development states. The FHA prohibits discrimination in housing based on “race, color, national origin, religion, sex (including gender identity and sexual orientation), familial status and disability.”
Owner financing is “the same as if you purchased it from for sale by owner or from your relative,” Houston-based Matador Lending explains. “No credit or income check, no employment verification. All you need is 20% down. If you have 20% down, we believe you deserve your home of choice no matter what your credit score is.”
The Houston Association of Realtors (HAR) provides information about the lending practice on its website, as do multiple companies, including Bankrate, Zillow, Houston Owner Financing, SWE Homes, Forbes and others. They point out that no credit check is needed to apply; in fact, that is partially the point of obtaining an owner-financed loan. All of these companies advertise “through international communication channels” because they market online. Their websites are freely available to people worldwide and provide the capability to receive loan information and apply for loans.
TREC, multiple realtors, title company owners and attorneys have all confirmed that 1) you do not need to be a citizen to purchase property in Texas; 2) you do not need an SSN to purchase property and it is legal to provide an ITIN to apply for a loan; 3) a form of identification is required to purchase property. This includes passports from any country in the world.
Irene Armendariz-Jackson, a licensed realtor, said: “As a realtor, if I refuse to sell property to a noncitizen I can be sued for discrimination based on race and lose my realtor license, which is my livelihood. If Americans don’t want noncitizens to purchase property then they should tell their elected officials to change the law. Until then, all realtors are required to follow the law.”
Armendariz-Jackson, a former congressional Republican candidate in El Paso, founded Border Security Coalition, a PAC to help conservatives get elected who prioritize border security.
HAR member and Houston area real estate broker who has specialized in owner financing for more than 20 years, Alexander DiSaggio is also an owner finance client. This type of loan is perfect for him, he said, because he is self-employed.
Alexander said he has been self employed since he was 14 years old and has learned throughout the years how difficult it is for self employed individuals to get approved for mortgages and even leases. From his experience, banks and landlords basically view self employed individuals as “unemployed.” Owner financing is perfect for him, he explains, because sellers are more subjective than banks and will view your entire story. It’s very difficult for non-W-2 employees to get traditional bank loans, even successful self-employed individuals, brokers have explained to The Center Square, because of the requirements imposed by banks providing traditional loans.
DiSaggio said customers should compare terms and shop around. “The typical terms of an owner finance transaction will include much higher down payments and higher interest rates than a typical bank mortgage. However, if you have a good real estate agent and a good lender, you should be given a strategy to prepare for refinancing into a lower interest rate as soon as possible,” he added.
He also warns against wrap around mortgage transactions (when a homeowner still holds the mortgage on the property when they owner finance it to the client). The owner financed loan then “wraps” around the existing mortgage.
“The issue is that their existing mortgage has a ‘due on sale’ clause, which means when they sell the property, their mortgage is due and payable at that time per their loan,” he said. Whichever entity holds the mortgage “could call the note due after the owner sells you the property. If the owner does not have the money to pay the remaining balance, the bank could foreclose on the home. Whether there is a 1% risk or a 100% risk, it is not a risk I am willing to take personally, or with my clients.”
Colony Ridge doesn’t provide loans for homes. Members of the Republican Party of Texas do, including those who specialize in owner-financed loans, wrap around mortgages, offer high interest rates, and sell to non-citizens. One title company owner explained noncitizens can obtain financing from companies statewide and “purchase out of country but all documents must be signed at a U.S. consulate for notarization purposes.”