Report: How Open Borders Policies Led to the Mortgage Meltdown

A little-publicized article in the Norfolk Crime Examiner two years ago featured a startling interview with a mortgage auditor. This man "personally audited thousands of sub prime loans."

The auditor found that "[o]ver 50% of the subprimes were for cash-out refi’s. Regardless of the loan criteria used to pull random samplings for audits, the majority of the last names were Hispanic. The loans I audited were primarily in CA, NV, AZ, FL, CO, compare those to the states with the highest number of foreclosures [and] illegal aliens."

Are these figures plausible? It appears so. A June 2007 MarketWatch article confirmed that "...[m]ore than half of subprime loans are actually cash-out refinance loans... we see subprime offers all-over the place: 'consolidate your debts' or 'tap you home's equity,' the ads read. As Lee puts it, why not pay off credit cards with 18% annual interest rates with a 9% loan?"

"Cash-out refi's" -- for those unfamiliar with the term -- are situations where a loan is refinanced and cash taken out of excess equity in the home. The excess equity could have been provided by a massive run-up in prices or simply a fraudulent appraisal.

The auditor observed that, "[o]ne borrower stole the [social security number] of a retiree and took out $3.5 million in loans, turned around and did cash-out refi’s, then fled the country. The retiree was left with ruined credit, $3.5 million in loans and trouble with the IRS."

Interestingly, cash-out refi's hit a 16-year high in late 2006.

Because subprime cash-out refi's were known to have higher default rates well before this, a reckoning could have been predicted by regulators.

"During the bailout, I called my Congressman and other leadership including Barney Frank and asked if there was a provision within the Bill that prohibited illegal aliens from being bailed out…..the answer was no. I asked if there was a provision in the Bill that helped homeowners that did not take out subprimes but are faced with losing their home due to the negative impact of subprimes and was told... no. So in other words, those that committed crimes to obtain the loans will get a helping hand to bail them out, compliments of the US [t]axpayer!"

"Of course, we all know that, on October 26, 2001, President Bush signed the USA Patriot Act. However, I would wager to say that almost no one knows that contained in section 326(b) of the USA Patriot Act is a provision that allows US banks to accept Mexican Matricula Consular cards (MCCs) as a valid form of ID for opening bank accounts."

"It should be noted that while... Congress ordered American banks to recognize these Mexican-issued cards, there is not one Mexican bank which accepts their own government’s Matricula Consular card as a valid form of ID, because the bearer’s identity is basically untraceable."

In fact, members of the House Judiciary Committee confirm that Mexican banks do not accept Matricula Consular cards as valid identification.

In 2004, a Congressional effort to limit the use of MCCs was defeated by a consortium of financial institutions, immigrants’ rights groups, consumer groups, and many others. These organizations had formed a loose coalition to defeat, again, limitations on the use of consular ID cards by banks, credit unions, thrifts and other financial institutions.

By a vote of 222 to 177, the House passed a bipartisan amendment (HA 754), introduced by Representatives Barney Frank (D-MA), Pastor (D-AZ), Hinojosa (D-TX), Oxley (R-OH) and Kolbe (R-AZ). It prohibited the Treasury Dept. from implementing regulations regarding the acceptance of FCCs by financial institutions.

But prior to that hearing, the FBI was adamantly opposed to the use of MCCs as valid identification. Assistant Director Steve McCraw's testimony before Congress in 2003 was blunt: "...consular ID cards are primarily being utilized by illegal aliens in the United States. Foreign nationals who are present in the U.S. legally have the ability to use various alternative forms of identification -- most notably a passport -- for the purposes of opening bank accounts..."

The FBI identified a variety of problems with MCCs:

* There was no centralized database of MCCs
* There were no interconnected, local databases of MCCs and, therefore, no way to authenticate the validity of a card
* MCCs could be obtained with little -- and sometimes -- no documentation whatsoever
* MCCs were easily forged (90% in circulation had no security features at all)

In 2003, Gabriel Manjarrez, Senior Vice President and Hispanic Marketing Executive of Bank of America testified before the House Subcommittee on Financial Institutions and Consumer Credit. He explained, "...The first program I want to discuss is our initiative to accept the use of the Mexican consulate ID, the Matricula Consular. We developed this initiative [in 2001] because we wanted to make it easier for Mexican citizens living in the USA to have access to banking services from Bank of America... Today, every single Bank of America banking center recognizes the Matricula Consular as a valid form of identification."

At least a dozen U.S. banks and mortgage insurers offered home loan programs targeted at illegal aliens.

And anecodotal evidence would appear to confirm alarming abuse of the system; the infamous $720,000 mortgage to two pairs of illegal immigrants with a combined annual income of less than $50,000 comes to mind.

Consider the findings of the auditor: "Over 50% of the sub primes were for cash-out refi’s. Regardless of the loan criteria used to pull random samplings for audits, the majority of the last names were Hispanic. The loans I audited were primarily in CA, NV, AZ, FL, CO, compare those to the states with the highest number of foreclosures & illegal aliens."

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Those who have supported open borders policies -- on either side of the aisle -- seem to have contributed mightily to the mortgage crisis. And someday we might actually get legacy media to tell the entire story of the mortgage meltdown.