The highly criticized (and praised) immigration bill set to take effect in Arizona in six weeks could boost foreclosures and wreak havoc on housing in the state, according to a report from Azcentral.com.
Apparently there are “thousands if not tens of thousands” of illegal immigrants who purchased homes in Arizona during the housing boom, thanks to the widespread availability of mortgage programs like no documentation loans.
And many real estate professionals and mortgage lenders simply looked the other way when it came to immigration status – if they did “check,” it wasn’t difficult to produce false documentation.
Heck, during the boom you could get whatever you needed in the way of fudged documentation and it appears as if most mortgage lenders didn’t care how seemingly obvious it may have been.
You can blame the originate-to-distribute model for that, as the loans were typically only held for a month or so before being packaged into toxic mortgage securities (let’s not forget the loan volume incentives offered up by the big banks either).
Once SB 1070 goes into effect on July 29, many illegal immigrants and legal residents who are making on-time mortgage payments may decide to strategically default, while others thinking of moving to the state may choose to go elsewhere.
That’s partially attributable to the stigma attached to being Hispanic in the state, according to Jay Butler, director of realty studies at Arizona State University, who spoke with the paper.
The result could be lower home prices, more foreclosure filings, and a larger inventory overhang, which could spell trouble for a state that already holds one of the highest distressed housing unit totals in the country.
There are also fears that investors may opt to buy second homes and investment properties elsewhere, as the economic impact of the bill is largely unknown.
And many renters already look to be leaving the state for greener pastures, all this while home sales are expected to flounder this summer.