Democrats demand answers from HUD on whether DACA recipients are being denied FHA loans

Lending

Three of the Senate’s most prominent Democrats are demanding answers from the Department of Housing and Urban Development on whether Deferred Action for Childhood Arrivals recipients are being denied Federal Housing Administration loans.

Last week, Buzzfeed News posted a comprehensive follow-up to a story first covered by HousingWire’s own Ask the Underwriter, Dani Hernandez. Back in September, Hernandez wrote that HUD was quietly denying FHA mortgage insurance for DACA recipients, also called Dreamers.

That led to Buzzfeed picking up the thread and exposing the issue even more, and now Senate Democrats want to know just what exactly is going on here.

This week, Sens. Bob Menendez, D-N.J., Cory Booker, D-N.J., and Catherine Cortez Masto, D-Nev., sent a letter to HUD Secretary Ben Carson, demanding that Carson clarify whether HUD now has a policy (officially or unofficially) to deny FHA loans to Dreamers.

“We are extremely alarmed about recent reports that the Department of Housing and Urban Development has implemented an unofficial policy of denying Federal Housing Administration insured loans to Deferred Action for Childhood Arrivals recipients,” the Democrats write in their letter to HUD.” We are appalled that the Trump Administration would exploit a federal government program to deny Dreamers an opportunity of owning their own home, a cornerstone of the American dream.”

Under DACA, people who came to the United States illegally when they were young (typically brought by their parents) are protected from deportation and given a work permit.

Under President Donald Trump, the government tried to end the DACA program, but the program was saved by the courts, although that fight is far from over.

As Hernandez previously detailed, DACA recipients were eligible for FHA insurance under certain circumstances, but that appears to have changed in recent months.

And the Democrats want to know why.

According to the Democrats, an FHA policy change on DACA would disqualify approximately 800,000 individuals approved for DACA from FHA-insured mortgage loans, “unfairly” denying them access to affordable homeownership.

“While federal courts have currently stopped President Trump from expelling DACA recipients from the country, this is yet another example of the Administration adopting underhanded tactics to punish DACA recipients for remaining in the United States,” the Democrats write. 

“According to recent reporting, HUD has privately instructed mortgage lenders to reject FHA mortgage loan applications from DACA recipients. HUD reportedly instructed lenders to reject these loans based on the Department’s new unofficial policy that DACA Employment Authorization Documents are no longer valid for purposes of substantiating work status,” they continue. “If these reports are accurate, this informal policy means that DACA recipients who would otherwise qualify for an FHA-insured mortgage loan, are now being unjustly rejected.”

The senators write that HUD has not provided any formal guidance on the matter, nor did it go through the typical procedures for a supposed policy change like this.

“We find it extremely problematic that HUD would implement such a policy in an unofficial and haphazard manner and with no public input,” the Senators write.

“And while we find this particular change to be abhorrent, we expect that any policy change that makes certain borrowers ineligible for FHA-insured mortgage loans would only be issued after sound and unambiguous legal reasoning, an opportunity for public input, and communication to FHA-approved lenders,” they continue.  “Anything less unfairly leaves borrowers, lenders, and real estate professionals in a state of limbo.”

Further, they write that the policy change targets a population that’s been continually targeted by the Trump administration throughout both Trump’s campaign and his presidency.

“Such ill-advised policies have ripple effects through immigrant communities, striking fear that interactions with financial institutions and government agencies may impact one’s ability to remain in the country,” the Democrats write.

“By communicating to lenders that they are to reject mortgage loan applications from DACA recipients, the Administration is sending a clear message that the benefits of affordable homeownership should not accrue to those who were not born in the United States,” they add. “If that is not the message that HUD intends to send, it should immediately clarify its policy.”

The Democrats also laid out a series of questions that they want HUD to answer by Friday, Dec. 21, 2018:

  1. Has HUD developed a policy regarding DACA recipients’ eligibility for FHA-insured mortgage loans
    1. If so, on what date did HUD first implement its current policy?  Has this policy changed since DACA was first announced in 2012?
    2. If so, please provide all relevant documents related to HUD’s current policy and any prior policies.  Please clarify which, if any, documents were provided to FHA-approved lenders or to HUD’s Homeownership Centers as well as the date of any such transmissions.
    3. If HUD has not developed a policy, please promptly provide clear and written guidance to FHA-approved lenders clarifying that as long as applicants would otherwise qualify, a borrower’s DACA status will not affect his or her eligibility for an FHA-insured mortgage loan.  Please provide a copy of any such guidance or communication.
  2. Please provide a detailed explanation and justification for the current policy, including any statutory or regulatory authority upon which such policy change relies.
  3. Which staff members and offices at HUD were involved in approving any such policy?
  4. Did the Office of General Counsel provide input and/or approval for this or any such previous policy?
  5. Have any HUD officials or staff communicated with any outside organizations about such a policy?  If so, please identify the names of the organizations as well as the dates and participants of any meetings.
  6. Have any HUD officials or staff discussed FHA eligibility of DACA recipients with officials from the White House, the Office of Management and Budget, the Department of Homeland Security, or any other executive branch agency?  If so, please identify the agencies as well as the dates and participants of any meetings.
  7. Did any of the agencies cited in response to question 6 provide input and/or approval for HUD’s current interpretation of DACA recipient eligibility for FHA loans?  If so, please provide all related documents.
  8. Please provide information from FHA-approved lenders on how many applicants have been rejected for FHA-insured mortgage loans pursuant to any such policy change.
  9. Please explain how this policy will affect existing FHA borrowers who are DACA recipients.
  10. Does HUD have any other plans to disqualify applicants from FHA-insured mortgage loans based on their immigration status?  If so, please provide detailed explanations, including any relevant statutory or regulatory authority.

HousingWire asked HUD for comment on the policy and whether it would be responding to the Democrats’ letter, but as of publication, HUD has not responded. This article will be updated should HUD respond.

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