DACA ‘dreamers’ could have issues

The press recently reported that the Federal Housing Administration (FHA) changed its position on the eligibility of Deferred Action for Childhood Arrival (DACA) home loan borrowers, which brought the challenge to national attention. Three U.S. senators sent a letter to the Department of Housing and Urban Development (HUD) to understand what was happening.

DACA ‘dreamers’ could have issues with FHA loans

In a response to the senator’s letters, FHA said policy does not permit it to lend money to homebuyers who do not have legal residency status. It stated that turning down DACA applicants wasn’t a policy change.

However, Fannie Mae – which will still back loans to DACA applicants – has a similar rule yet say it will still back home loans made to DACA recipients.

Tim Rood, the chairman of The Collingwood Group, explained in a recent opinion piece in DSNews, that the issue focuses on just one question: Do DACA recipients have lawful residence in the U.S.?

Rood states that it once was up to lenders to determine whether DACA was a legal residency status, and that FHA “appears to have made an internal determination, based on language from US Citizenship and Immigration Services (USCIS), that DACA does not provide legal residency.”

A key to understanding the change is that DACA recipients are viewed as “legally present” as opposed to a “legal resident.” Interpretation of the words “legally present” appear to be key in understanding both Fannie Mae and FHA’s decision whether or not to lend money to DACA recipients.

“Fannie Mae purchases and securitizes mortgages to non-citizens who are lawful permanent or non-permanent residents of the United States under the same terms available to US citizens,” the government-sponsored enterprise said in a bulletin. “If a borrower can provide documentation of three-year income continuity when required, the fact that their status is renewed only every two years is not a factor – the borrower is legally present and has met the continuity of income requirements.”

As outlined by Rood, FHA apparently thinks “legally present” is not the same thing as a lawful resident, adding that “Lenders who make FHA loans to DACA borrowers should be ready to make a strong legal case that FHA’s interpretation is wrong.”

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