Illegal Aliens at Fault for the Current Recession

A lot of finger-pointing is going on with respect to the current recession. Democrats are screaming that Republican George W. Bush caused it. Republicans are screaming that it was caused by Democrats or that Democrat Obama is making it worse. I hope that somewhere economists are objectively looking at the facts to find the real causes so that future generations can learn from our mistakes.

Par for the course, anti-immigration fanatics are blaming illegal aliens for the cause of the current recession. The latest attempt is by William Campenni, an unemployed engineer, who is angry at illegal aliens for his plight: http://www.humanevents.com/article.php?id=33821

Campenni concedes that other factors contributed to the collapse of the credit markets including low interest, lowered standards, securitized mortgages, Democrats, the Community Reinvestment Act and Alan Greenspan. But this financial guru informs his readers that these factors “could not have brought about a collapse of the magnitude that ensued.” No, what caused the mortgage meltdown were banks offering mortgages to illegal aliens.

Campenni claims that few sub-prime mortgages went to poor people. Instead most sub-prime mortgages that went into foreclosure went to illegal aliens, those who intended to exploit illegal aliens and minorities who lost their jobs to illegal aliens. He bases this claim on the fact that a lot of foreclosures were in areas that are believed to have large concentrations of illegal aliens (in other words, areas with high concentrations of Hispanic people).

Campenni continues his argument that therefore illegal aliens are responsible for the current recession because the mortgage meltdown was the event that got the ball rolling. Even the defaulted prime mortgages are the fault of illegal aliens because those homeowners wouldn’t have lost their jobs but for the defaulting loans of illegal aliens.

First of all, the loans to illegal aliens who used an Individual Taxpayer Identification Number (“ITIN”) rather than a Social Security Number were not no-document or low-document loans. These loans were subject to more scrutiny than other sub-prime loans, and borrowers were required to show that they were creditworthy and that they paid taxes.

But the actual facts are hard to come by. No actual data has been kept on the rate of foreclosure of loans to illegal aliens. However, two journalists over the past two years have independently tried to find out.

The first was a Wall Street Journal article from October 2007: http://online.wsj.com/article/SB119188674981652816.html?apl=y&r=332625 The second was a Los Angeles Times article from October 2008: http://articles.latimes.com/2008/oct/06/local/me-immighome6

These journalists made inquiries of lenders, the Hispanic National Mortgage Association and real estate professionals. All sources were unanimous in reporting that loans to illegal aliens had a noticeably lower foreclosure rate than other mortgages.

One response to this would be that those articles are outdated. The most recent is a year old. The rate of foreclosure for those mortgages could have increased. The foreclosure rate certainly could have increased over the past year. We don’t know because data is not collected for those types of loans.

Another response might be that those articles are not based on reliable statistical data that the journalists merely made inquiries. Unfortunately we don’t have accurate statistical data on this issue. William Campenni bases his assumptions on the fact that a lot of foreclosures were in areas where a lot of spicks live.