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Immigrants Delinquent on Mortgages 3.6 Times as Often as Natives
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For the last seven years, academics have been quietly compiling a mountain of evidence that the Housing Bubble and Bust was, like I’ve been saying since 2007, intertwined with contemporary America’s sacred cow of Diversity. For example, from a 2015 issue of Real Estate Economics:

Immigrants and Mortgage Delinquency

Zhenguo Lin
Department of Finance
Mihaylo College of Business and Economics
California State University, Fullerton,

Yingchun Liu
California State University, Fullerton,

Jia Xie
Bank of Canada

… Through the years, administrations touted home owning as a way to put immigrant and low-income families on a path to social and financial stability by promoting a more involved citizenry.1

1Clinton and Bush administrations launched ambitious programs to promote home ownership, especially for low-income households. For instance, President Clinton’s National Homeownership Strategy set a goal of allowing millions of families to own homes, in part by making financing more available, affordable, and flexible. President George W. Bush famously said in 2002 that “We can put light where there’s darkness, and hope where there’s despondency in this country. And part of it is working together as a nation to encourage folks to own their own home,” and in a 2004 speech he said again that “We’re creating … an ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, welcome to my house, welcome to my piece of property.”

Actually, I don’t think Bush’s speeches on Increasing Minority Homeownership are all that famous unless you were in the mortgage industry or read iSteve.

Increased home ownership may not only build wealth for immigrant households, but perhaps equally important, it is a signal of assimilation and achievement of the “American Dream.” As a result, the expansion of housing credit in the United States from the mid-1990s to the mid-2000s was largely cheered, and home ownership by households of immigrants and others reached record-high rates in the mid-2000s. According to the Census, the home ownership rate among immigrant households increased from 46.5 percent in 1995 to 53.3 percent in 2006. Meanwhile, the home ownership rate among native-born Americans increased from 66.1 percent in 1995 to 68.8 percent in 2006. In other words, the gap in home ownership between immigrant and native households dropped from 19.6 percent in 1995 to 15.5 percent in 2006.

As the housing and economic crises developed in 2007-2009, however, immigrants were blamed by the media for the large increase in delinquencies, defaults, and foreclosures in the housing market that helped to trigger the housing crisis and ultimately facilitated the bankruptcies or near-bankruptcies of multiple financial institutions (Malkin, 2008).2

The citation is to a Michelle Malkin column.

Should immigrants really be blamed for the current housing crisis? In particular, are immigrants more likely to be delinquent on mortgages than natives and, if so, why?

Personally, I think those are great questions to ask; but, to be honest, the total number of people in the media who are interested in them consists pretty much of Michelle Malkin, me, and a handful of other disreputable sorts.

To shed light on these and related questions, we investigate the mortgage delinquency behavior of immigrant households by using the 2009 Panel Study of Income Dynamics (PSID) data.

… We use the 2009 wave of the Panel Study of Income Dynamics (PSID), that is collected by the University of Michigan Survey Center. PSID is a longitudinal household survey which started in 1968, with a sample of over 18,000 individuals living in over 5,000 families in the U.S. Individuals in each household were followed annually from 1968 to 1997, and biannually after 1997. …

We should note that all of the immigrant households in the PSID came to the U.S. before 1999. Hence, the duration of their stays ranges from 10 to 40 years …

We restrict the data used in the current study as follows: the sample includes only mortgage-indebted households, i.e., those who own (rather than rent) their primary residences and who have at least one mortgage on their primary residence. After omitting observations with missing values, the final data include information on 2,383 households. Around 6.7 percent (159) of the households are immigrant households, and around 5.6 percent (125) of native-born households are second generation households.

… The difference in the mortgage delinquency rates between immigrants (15.7%) and natives (4.4%) is significant.

It’s also big: the 20th Century immigrants’ self-admitted delinquency rate of 15.7% is over 3.5 times the size of the natives’ rate of 4.4%.

Screenshot 2015-10-12 23.56.28

We find that immigrants are more likely to be delinquent on mortgages than natives, even after controlling for a rich set of household demographic and socioeconomic status and mortgage characteristics. This finding is unlikely to be driven by unobservable financial constraints, local housing market conditions or unobservable characteristics of the metropolitan areas where immigrants tend to cluster. There is evidence of imperfect immigrant integration: the relatively high delinquency rate of immigrants is mainly driven by the relatively recent immigrants who have been in the U.S. for 10 to 20 years.

The paper doesn’t give the raw delinquency rate for the 25% of the immigrants in the sample who arrived from 1989-1999 (keep in mind that no immigrants arriving after 1999 were included in the sample, so these are the most recent ones we’ve got). But I’d guesstimate the delinquency rate for the most recent immigrants in the sample was six to nine times as high as the natives’ delinquency rate.

And the delinquency rate in 2009 for immigrants arriving from 2000 onward was likely even higher than for the highly delinquent cohort that arrived in 1989-1999. My guess would be that immigrant mortgage-holders who arrived in 1989-2009 would have been delinquent about an order of magnitude more often than white native mortgage-holders.

 
    []
  1. Maj. Kong says:

    Phil Gramm rides again

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  2. Lot says:

    I also noticed that 34% of immigrants who were able to get mortgages have “less than high school” education. How about the ones who were rejected for a mortgage?

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  3. Doorway says:

    If we take this data as is, it is claimed that whites are more delinquent than blacks, so not so sure this data hasn’t been fiddled with, since that definitely isn’t true.

    Read More
    • Replies: @MSP
    Looks like another set of statistics where Hispanic is lumped in with white.
  4. MSP says:
    @Doorway
    If we take this data as is, it is claimed that whites are more delinquent than blacks, so not so sure this data hasn't been fiddled with, since that definitely isn't true.

    Looks like another set of statistics where Hispanic is lumped in with white.

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  5. unit472 says:

    It has always bothered me that this sort of data ( loan defaults by ethnicity) is not publicly available and has to be teased from surveys. You can bet FHA or the GSEs could spit that data out with a few keystrokes were they willing just as they do spit it out when they are looking for racial discrimination in lending. I recall the San Jose Mercury News tried to estimate the number of Latino defaults by using family names in foreclosure suits filed in local courts. That is if the case was Wells Fargo v. Menendez it went into the Latino bucket even though Menendez might be Filipino, white or Latino.

    It is also the case that when and where a person bought their home matters as far as default rates. Those who bought at the peak of the bubble in the more bubblicious areas suffered far higher defaults when the market went south. If you bought in Marin County you might not suffer a huge loss but if you bought in Merced you were screwed. Even those who bought in San Jose in 2006 did OK if they hung on to their house as prices recovered.

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  6. countenance says: • Website

    As the housing and economic crises developed in 2007-2009, however, immigrants were blamed by the media

    They must not mean “media” in terms of the NYT.

    Read More
    • Replies: @Steve Sailer
    I saw the trailer for the upcoming film of Michael Lewis's "The Big Short." It looks like the movie will attribute the surge in demand to blond strippers who own 6 houses.
  7. Increased home ownership may not only build wealth for immigrant households, but perhaps equally important, it is a signal of assimilation and achievement of the “American Dream.”

    You never really own your home in terms of “free and clear.” You’re either paying off a mortgage to the bank, or paying astronomic property taxes (where I live, anyway) to your local government for the right to continue to live there. My property taxes are around $900 a month. Granted, I could rent the house out for more thn that, but still . . .

    Read More
    • Replies: @AndrewR
    Oh my god. I'm assuming your home is worth millions then.
  8. To be sure. But don’t lose sight of the fact that inflating the bubble was the work of a push/pull amplifier. The American mortgage market is the largest debt pool in the world. Those responsible for packaging the shaky mortgages and reselling them to investors were salivating over the potential commissions from mining a hitherto untapped vein. Bush was speaking on behalf of the bankers more than for the downtrodden.

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  9. @countenance
    As the housing and economic crises developed in 2007-2009, however, immigrants were blamed by the media

    They must not mean "media" in terms of the NYT.

    I saw the trailer for the upcoming film of Michael Lewis’s “The Big Short.” It looks like the movie will attribute the surge in demand to blond strippers who own 6 houses.

    Read More
  10. Clyde says:

    Immigrants always have an out that Americans don’t have. And that’s to skedaddle back home to the third world nation they came from:

    a) so they can pile up the real estate debt
    b) use their homes like ATMs
    c) skim from all cash businesses
    d) evade most taxes (their mentality is paying taxes is for suckers meaning Americans)
    e) employ illegal aliens (from their homeland) at slave wages
    f) get SBA loans at preferential rates
    …….. THEN when the law is coming down on them, go back home where they have been depositing profits all these years.

    How can a native born American compete with this business model?

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    • Replies: @Reg Cæsar

    …go back home where they have been depositing profits all these years.

    How can a native born American compete with this business model?
     
    Fred Reed and Jesse Ventura found a way-- follow them south!

    Money goes further abroad, as long as you don't insist on First World amenities like potable water. You know that Zamboni song you hear at ice rinks everywhere? Martin Zellar and his family have been living well for years on the royalties (and apparently little else) in a Mexican mountain village.
  11. Er, doesn’t the paper also indicate that immigrants are a zillion times more like likely to write papers on ‘Immigrants and Mortgage Delinquency’?

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  12. peterike says:

    Two points.

    That fact that two people called Zhenguo Lin and Yingchun Liu are both teaching at Cal State, Fullerton, is itself a massive indictment of our immigration policies. Is “college professor” now a job Americans won’t do?

    Second, there are some good nuggets around Chinese mortgage and tax behavior in this recent New Yorker article on a Chinatown bank. The New Yorker occasionally lets true-facts slip into its reporting, thought it never quite gets to where those facts lead. One tidbit:

    “However, unspoken in many discussions about the Chinatown economy is the issue of tax evasion. The under-reporting of income means that the gap between a prospective home buyer’s official income and his or her actual resources can be enormous.”

    http://www.newyorker.com/magazine/2015/10/12/the-accused-jiayang-fan

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  13. Mike1 says:

    This paper is junk and it is immediately obvious it is not written by anyone with any real knowledge of the lending industry. Down payment is the big predictor of repayment and there is nothing to indicate this was used to separate the data.
    The second big tell is that immigration status is used rather than the race of the immigrants. If I lend to a pool of Asian immigrants they are without question going to have lower defaults than native born White Americans. If I lend to a pool of Hispanic immigrants they are without question going to default less than a pool of native born African Americans.
    Default risk is simple: skin in the game (aka high deposit) equals very low default. If you want to risk your money without a high down payment the racial breakdown is this:
    Asian: will pay.
    White: will usually pay.
    Hispanic: will pay when household income is ok.
    African American: will do everything in their power to make collecting hard and will default even when it makes no sense at all.

    Read More
    • Replies: @Twinkie

    The second big tell is that immigration status is used rather than the race of the immigrants. If I lend to a pool of Asian immigrants they are without question going to have lower defaults than native born White Americans. If I lend to a pool of Hispanic immigrants they are without question going to default less than a pool of native born African Americans.
     
    The utility of natives vs. immigrants comparison is limited by the fact that both the "natives" and "immigrants" are composed of very different demographics. I agree that it would have made better sense (and much greater utility) to break down both categories by race (or, better yet, in the case of the immigrants, national origin).
  14. ic1000 says:

    > Should immigrants really be blamed for the current housing crisis?

    Depends what you mean by blamed.

    If you’re asking, “were immigrants responsible for a greatly oversized proportion of residential home defaults?”, well, Yes. Obviously.

    To imply that borrowers rather than lenders are the parties that should evaluate the risk of mortgage default is to walk through the mirror into Bizarro World.

    Us old-fashioned types on this side of the looking glass still think that Moral Hazard should be on the lenders’ plates.

    Good thing that that’s so well understood in the media, government, and academia.

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  15. Should immigrants really be blamed for the current housing crisis?

    Immigrants should be blamed for nothing but their opportunism.

    Otherwise, it’s like blaming the raccoons for damn fool you leaving the door ajar last night.

    Read More
  16. @Clyde
    Immigrants always have an out that Americans don't have. And that's to skedaddle back home to the third world nation they came from:

    a) so they can pile up the real estate debt
    b) use their homes like ATMs
    c) skim from all cash businesses
    d) evade most taxes (their mentality is paying taxes is for suckers meaning Americans)
    e) employ illegal aliens (from their homeland) at slave wages
    f) get SBA loans at preferential rates
    ........ THEN when the law is coming down on them, go back home where they have been depositing profits all these years.

    How can a native born American compete with this business model?

    …go back home where they have been depositing profits all these years.

    How can a native born American compete with this business model?

    Fred Reed and Jesse Ventura found a way– follow them south!

    Money goes further abroad, as long as you don’t insist on First World amenities like potable water. You know that Zamboni song you hear at ice rinks everywhere? Martin Zellar and his family have been living well for years on the royalties (and apparently little else) in a Mexican mountain village.

    Read More
  17. colm says:

    Nobody noticed that all of the profs doing the study are Chinese who didn’t even bother to anglicize their names.

    Read More
  18. AndrewR says:
    @Harry Baldwin
    Increased home ownership may not only build wealth for immigrant households, but perhaps equally important, it is a signal of assimilation and achievement of the “American Dream.”

    You never really own your home in terms of "free and clear." You're either paying off a mortgage to the bank, or paying astronomic property taxes (where I live, anyway) to your local government for the right to continue to live there. My property taxes are around $900 a month. Granted, I could rent the house out for more thn that, but still . . .

    Oh my god. I’m assuming your home is worth millions then.

    Read More
  19. Zhenguo Lin
    Department of Finance
    Mihaylo College of Business and Economics
    California State University, Fullerton

    Yingchun Liu
    California State University, Fullerton

    Immigrants doing jobs that native-born Americans just won’t do. Apparently, California State University couldn’t find any qualified native-born American Finance PhDs.

    Read More
    • Replies: @AnAnon
    The state university likely went out of its way to find non-Americans to fill the positions. the admins at the top love diversity, at least until it gets to 100% diverse.
  20. The author forgot to mention the loan default data presented is Canadian data, not US data.

    It would be much more useful to show US loan default data.

    Read More
    • Replies: @res
    What makes you say it is Canadian data? The PSID web page states it is a US survey: https://psidonline.isr.umich.edu/
  21. res says:
    @Joe Franklin
    The author forgot to mention the loan default data presented is Canadian data, not US data.

    It would be much more useful to show US loan default data.

    What makes you say it is Canadian data? The PSID web page states it is a US survey: https://psidonline.isr.umich.edu/

    Read More
  22. AnAnon says:
    @E. Rekshun
    Zhenguo Lin
    Department of Finance
    Mihaylo College of Business and Economics
    California State University, Fullerton


    Yingchun Liu
    California State University, Fullerton


    Immigrants doing jobs that native-born Americans just won't do. Apparently, California State University couldn't find any qualified native-born American Finance PhDs.

    The state university likely went out of its way to find non-Americans to fill the positions. the admins at the top love diversity, at least until it gets to 100% diverse.

    Read More
  23. Twinkie says:
    @Mike1
    This paper is junk and it is immediately obvious it is not written by anyone with any real knowledge of the lending industry. Down payment is the big predictor of repayment and there is nothing to indicate this was used to separate the data.
    The second big tell is that immigration status is used rather than the race of the immigrants. If I lend to a pool of Asian immigrants they are without question going to have lower defaults than native born White Americans. If I lend to a pool of Hispanic immigrants they are without question going to default less than a pool of native born African Americans.
    Default risk is simple: skin in the game (aka high deposit) equals very low default. If you want to risk your money without a high down payment the racial breakdown is this:
    Asian: will pay.
    White: will usually pay.
    Hispanic: will pay when household income is ok.
    African American: will do everything in their power to make collecting hard and will default even when it makes no sense at all.

    The second big tell is that immigration status is used rather than the race of the immigrants. If I lend to a pool of Asian immigrants they are without question going to have lower defaults than native born White Americans. If I lend to a pool of Hispanic immigrants they are without question going to default less than a pool of native born African Americans.

    The utility of natives vs. immigrants comparison is limited by the fact that both the “natives” and “immigrants” are composed of very different demographics. I agree that it would have made better sense (and much greater utility) to break down both categories by race (or, better yet, in the case of the immigrants, national origin).

    Read More
  24. BillP says:

    Keep in mind Bush was only continuing the compassionate policy goals originally set by Clinton.

    There are quite a few forgotten press releases from 1999-2000 where Clinton showboats about his “record level of minority homeownership”. Dig around in Google Groups search and you’ll find them.

    Read More
  25. Hudson City Savings Bank was just fined $33 million for avoiding black and Hispanic customers in Philadelphia and New York City. Certainly immigrants were a large portion of the people that they were avoiding.

    http://www.washingtonpost.com/news/wonkblog/wp/2015/09/25/what-it-looks-like-when-a-bank-structures-its-business-to-avoid-minorities/?postshare=5201443281084430

    Read More

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