Will Fannie Mae, Freddie Mac, FHA or USDA accept the DACA Visa status-C33 for their mortgage loan programs? Lately, this question is one of the most frequently asked questions received at Mortgage Currentcy; which a subscription-based technical resource platform for mortgage originators and mortgage operations staff. We are writing this article to bring awareness to what seems to be a shift in the various agency requirements for DACA Visa Status borrowers.
The Agency Response?
When researching the acceptance of the DACA Visa Status, the first thing lender’s notice is that the guidelines for non-permanent residents are not as clear as lenders would like them to be. Many times, the determination as to whether or not a Visa status is acceptable is left up to the lender’s discretion, based on little detail in the agency guidelines. Lack of detailed guidance adds risk to the lender and may leave the lender in a precarious situation if they decide on a policy that is ultimately at odds with the interpretation of the agency. In this article we will review what a lender should consider and share with you the communication we have received from our experts and subscribers on this issue.
We encourage all of you to reach out to the agencies and request an “official written opinion” on this topic to protect your interests.
What is DACA Visa Status and Why Are Lenders Concerned?
DACA [Deferred Action for Childhood Arrivals] status is a Visa status that was offered to children who were brought to the US illegally by their parents but have been here the majority of their lives. Many of the “children” who qualified for this status are now well into their adulthood. DACA was created as a way for working-age adults to obtain a Visa status that would allow them to work in the US, until Congress could agree on what to do with this segment of the population. In February of this year DACA status was rescinded and it is presently not available for any new applicants. However, according to the USCIS site those who already have DACA status may apply for renewals of their employment authorizations which will allow them to continue to work in the US. It is estimated that there are presently about 700,000 people with DACA status.
Herein Lies the Issue!
The lender’s policy team must now decide if the DACA Visa status meets the criteria of the agencies and investors that they sell loans to. Since DACA is rescinded, and the program was a deferred action (from deportation), does the person with a DACA status live here legally and do they have non-permanent resident status? The determination of that fine line is the issue lenders find problematic when considering the agency guidelines. Most agencies define the guideline as the borrower may be acceptable for financing, if they are a legal non-permanent resident. Until DACA was rescinded, the borrower met those guidelines. Now the question is do those with that status, still meet those guidelines?
What is a Lender to Do?
The first thing a lender should do is gather information from their investor outlets regarding this issue. If you do business with Fannie Mae, Freddie Mac, FHA, and USDA then send an inquiry to them asking if they will accept C33-DACA status borrowers. Do the same thing with any of your investors. This due diligence will not only assist you in your policy-making process, but it may also provide you with documented evidence that you followed proper protocol in attempting to get an answer. Once you have gathered your information, then it is time for the Executive team to consider the consequences of offering or not offering mortgage loans to DACA status borrowers. Next, seek your legal counsel’s opinion as they will need to defend your thought process if required to do so.
Executive Team Considerations
Risk Consideration #1-Sales Staff Book of Business
If you presently offer DACA status loans and decide that you will not do loans with this status anymore, the originators will likely be upset with you. For some, it is a decent source of business, and taking it away is not going to make them happy, which is why they need to know why you had to discontinue the program if that is your final decision. As mortgage bankers, you may find that you do not have an outlet for these loans. If you have no outlet, then what will you do with these loans? For those of you that are bank-owned, the bank may or may not decide to accept those loans into a portfolio.
Risk Consideration #2-Agency Interpretation vs. Your Company Interpretation
If the agencies “leave it up to the lender” to determine what Visas’ will or will not be acceptable, then what happens if the agency or investor does not agree with you? Will you have loans tied up in your warehouse lines or face buyback issues? Will you need to sell those loans at a discount? Can your company sustain that hit if this happens?
Risk Consideration #3-False Claims Act
For those of you that have had to deal with the “False Claims Act” litigation for FHA loans, will this rear its ugly head again if you offer DACA status loans and then FHA decides later that you misinterpreted their guidelines? This is another area where good legal advice is needed.
Risk Consideration #4-Fair Lending
Will not offering mortgages with DACA Visa Status affect your Fair Lending risk? It is a valuable exercise to check what your “peers” are offering or not offering. If everyone else offers DACA status loans and you do not, then the question will always be “why”? Again, this is where your due diligence and documentation comes in. When dealing with Disparate Treatment concerns, it is always best practices to ensure that your guidelines and policy reference only criteria that would not be considered discriminatory on a prohibited basis. For instance, in Visa acceptance policy you may state what criteria you require of the Visa Type, such as, lawful resident, authorization to work, documentation to prove that, length of stay, type of income, assets, etc.
Responses of Agencies
Our experts and subscribers reached out to Fannie Mae, Freddie Mac, FHA and USDA. Some called, others wrote. Here are the snippets of the responses our experts and subscribers received. However, we caution you to not take our word for it. As the lender you are responsible for your practices and we strongly recommend that you seek competent legal counsel and your own agency responses before implementing policy.
USDA Expert: The following is an exact quote in my response from USDA:
“All applicants must be a U.S. Citizen or be a non-permanent resident alien under the 7 CFR 3555. At this time the DACA status does not meet the regulation.”
FHA Expert: Your question was regarding EAD with C33 DACA code.
DACA is not eligible for FHA-insured mortgage loans. Non-U.S. citizens without lawful residency in the U.S. are not eligible.
Subscriber: EAD Code C33 is not a code that is acceptable for FHA. 8 CRF 274A.12(c)(33) Sincerely, FHA Customer Service Team
Subscriber: In a verbal conversation with Fannie Mae and Freddie Mac, the lender was told that they should interpret the guidelines and base their policy on those guidelines. No official opinion on this particular Visa status has been issued.
As you can see from the various responses, this is a tough issue for lenders to solve for because Visa type acceptance is not very detailed in the agency rules. As the proverbial saying goes “The Jury is Still Out”!
Interested in Learning More about Working with Visa Status Buyers? Mortgage Currentcy subscribers have access to two training classes on this subject, a Visa terminology guide and a Visa Reference Chart. If you’re not a subscriber, Fair Lending Diversity offers these courses for a small fee on their site. Included in the course are the reference materials mentioned above.
To subscribe to Mortgage Currentcy, visit us at www.mortgagecurrentcy.com
To purchase our “Working with Visa Buyers” classes go to www.fairlendingdiversity.com/training