The solution to the current real estate recession is as obvious as the noses on our faces. It is not loaning hundreds of billions of dollars to investment bankers. It is not more regulation of the capital markets. It is not offering new tax credits to home builders and home buyers. It is most certainly not engaging in demagoguery.
The solution is to offer qualified home buyers a green card for purchasing and living in a foreclosed home. This solution is like a modern day Homestead Act. And like the old western Homestead Act, this solution would unleash the economic power of some of the most industrious residents of America.
Illegal immigrants can be a significant source of money. According to reasonable estimates, illegal immigrants using bogus Social Security numbers pay about $6 billion a year in Social Security taxes. They also send billions of dollars back to relatives in Mexico.
Rather than export the dollars of industrious illegal immigrants we should use those dollars to buy and fix up run-down foreclosed homes. Clearly, many illegal immigrants have the skills to fix up foreclosed homes as evidenced by the fact that U.S. citizens regularly hire illegal immigrants to fix up and maintain their homes and businesses.
The reason that this solution is as obvious as the noses on our faces is that it has been around since 1776 when Adam Smith published, "An Inquiry into the Nature and Causes of the Wealth of Nations."
Smith observed that: "The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life." The logical conclusion that Smith drew from this economic fact was that when a nation rewards labor it increases the national wealth. More to the point of this article is the observation by the professor who taught Smith as a student that: "Industrious foreigners should therefore be invited to us, and all persons of industry should live with us unmolested and easy."
More than 200 years of economic history in America has proven that a nation does not grow wealthy by exploiting labor but by exploiting markets. Today we are failing to exploit the market for homes by preventing a large pool of potential home buyers from buying a home. While no numbers are available as to the size of this pool of industrious illegal immigrant home buyers, the power law of distribution would logically lead one to believe that there are probably 2.4 million industrious illegal immigrants who could come up with a 20-30 percent down payment to buy a foreclosed home.
As a modern day political economist, Alan Greenspan has noted "… a market economy requires a critical mass of homeowners. …" America needs to promptly increase the number of homeowners by offering green cards to qualified buyers of foreclosed homes. Unlike the solutions implemented by the Federal Reserve Bank and Congress, this solution will not cost hundreds of billions of dollars. In fact, this solution will unleash billions of dollars into the home-market economy.
And by rewarding those who have labored industriously and saved enough money to make a down payment on a foreclosed home, we will reignite an increase in home values. As home values rise, property values will once again exceed the amount of loans against the homes and the capital markets will be able to sell home mortgages again in the secondary mortgage market.
Of course, the most difficult part of any plan is the details. The green card home buyers program should be available only to those who have worked in America for five years or more. Clearly, in order to qualify for a green card when purchasing a foreclosed home, those with serious criminal records should be disqualified. Also, significant down payments should be required. Certainly 20 percent or more of the appraised value would be an appropriate down payment. Income verification will present a problem in many cases but should be required.
Most importantly, licensed real estate mortgage brokers will be the critical link between industrious illegal immigrants and home ownership. Mortgage brokers can provide the confidential and safe forum for full disclosure between the industrious illegal immigrant and the lender in the home-buying process.
The federal government’s immigration department, known as USCIS, will need to publish clear guidelines to mortgage brokers and lenders as to what steps will qualify the industrious illegal immigrant who is buying a foreclosed home for a green card. Probably the most difficult part of this plan is getting USCIS to act quickly and promptly on all applications for a green card submitted in connection with the purchase of a foreclosed home.
While some will raise concerns about the risk of terrorists obtaining green cards, common sense tells us that suicide bombers are not likely to be homeowners. The comfortable hope of owning a home is not the emotional trigger to a bombing. Naturally, USCIS can continue to perform background checks after the close of escrow inasmuch as the new holder of a green card will have a permanent address and can be easily located.
But it is important to remember that the key to reigniting the single-family home market and the value of homes is a clear, safe path to a green card for the industrious illegal immigrant. Fortunately, real estate brokers, mortgage brokers and lenders have demonstrated a remarkable ability to make the dream of home ownership come true year after year after year. This could be the year that America lets industrious illegal immigrants bail out the real estate market for all of us.
Harold A. Justman is a practicing real estate lawyer in San Mateo, Calif. He is also the editor of The Robert Bruss California Real Estate Law Newsletter and regularly serves as an expert witness on the standards of care of real estate brokers.
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