In all lending markets, knowledge and understanding are critical to the offering of a specific product or service. In some cases, the process becomes more challenging and greater insight is required, such as in the case of lending to borrowers who are immigrants.
Are there lending and borrowing options available for United States residents who are not American citizens? The short answer is yes. It should be remembered that every case is different but, in general, foreign-born borrowers will need to confirm that they have a consistent source of income, an established credit score, a valid Social Security number and an eligible work visa.
Not every lender offers this type of loan program because of the many complexities involved and the lack of understanding of special needs associated with providing loans to foreign nationals. Of course, portfolio underwriting requirements will differ from lender to lender.
Expanding markets
The U.S. has been the top destination for international migrants since at least 1960, with one-fifth of the world’s migrants living here as of 2016. Even more than before, immigration is tied closely to discussions about the U.S. economy and global competitiveness, national security and the country’s role in humanitarian protection at a time of record global displacement.
More than 43.7 million immigrants resided in the U.S. in 2016, accounting for 13.5 percent of the total U.S. population of approximately 323 million, according to American Community Survey data. That figure jumped by 3.8 million people compared with 2010.
The increase in immigration is significant and seems to reflect continued growth after immigration slowed substantially during the recession. This expanding market indicates a growing opportunity for commercial mortgage brokers with the appropriate skills and interest for tapping into this population.
Immigration has a profound impact on the U.S. Throughout its history, this country has been a destination for migrants from across the globe. Immigration touches on myriad facets of American life — including economic, political and cultural characteristics.
The visa challenge
A visa is an endorsement or stamp on a passport indicating that the holder is allowed to enter, leave or stay for a specified period of time in the U.S. Although there are nearly 185 different types of visas, there are two main categories.
The first is the non-immigrant visa, which is for people temporarily entering the U.S. for tourism, business, work or study. Non-immigrant visa status restricts the activities and reasons for which one is allowed entry.
For clarification purposes, the H-1B visa is an employment-based, non-immigrant visa for temporary workers. To be eligible for this visa, an employer must offer a job to the individual and apply for an H-1B visa through U.S. Citizenship and Immigration Services (USCIS).
“ Immigration touches on myriad facets of American life — including economic, political and cultural characteristics. ”
The second category is the immigrant visa, which is issued to a person wishing to live permanently in the U.S. The terms “green card” and “immigration visa” are synonymous and are used interchangeably. Green cards are valid for 10 years for permanent residents, and two years for conditional permanent residents. After this period, the card must be renewed or replaced.
Of course, not all immigrants meet the basic eligibility or lending requirements of certain lenders or specific government-sponsored programs. The first step in the qualification process is to understand the U.S. government’s visa standards, which will be key to confirming that the potential borrower has the legal right to be in the U.S.
From many lands
Approximately 26 percent of immigrants in the U.S. arrived from Mexico. The other top countries of origin, as of 2017, were China, India and the Philippines, according to the United Nations and the Pew Research Center. These three countries accounted for almost 14 percent of all of the foreign born in the U.S., while immigrants from South and East Asia combine to represent about 27 percent of all immigrants living in the U.S.
On another front, according to research reported in Forbes, immigrants are important contributors to the U.S. innovation economy. An estimated 25 percent of U.S. patent filings are made by immigrants, according to Forbes.
Immigrants to the U.S. also create businesses at a high rate, research from the National Bureau of Economic Research (NBER) shows. According to a 2018 paper submitted to the NBER, about 25 percent of new companies launched in the U.S. were started by first-generation American immigrants, and that share exceeds 40 percent in some states.
In addition, Forbes reports, based on research by the National Foundation for American Policy, more than half of U.S. startup companies valued at $1 billion or more (44 of 87 such companies) were launched by immigrants. And some 70 percent of these startup companies have key management or product-development employees who are immigrants.
The number of self-employed foreign-born residents in the U.S. increased 4.6 times over the 30 years ending in 2000 — from about 314,000 to more than 1.4 million, according to U.S. Census Bureau data. As of 2015, an American Immigration Council analysis of census data shows that number had jumped to 3.3 million immigrant business owners, representing more than 20 percent of all self-employed U.S. residents. Their companies generated business income of $72.3 billion. These numbers represent a large potential source of business for the knowledgeable and motivated commercial mortgage broker who has the skills to develop a market specialty.
Positioning strategy
Lending to U.S. residents who are foreign nationals is the type of financing niche that requires more than basic product knowledge. The successful commercial mortgage broker will understand the potential client’s culture, language and the many nuances associated with a specific market. In other words, the broker has to develop a specialization and in-depth market understanding.
Specialization can be defined as the process of concentrating on a narrow set of products, services and markets. Such a business strategy normally results in a strong customer following, loyalty and support. Specialization assumes a superior positioning strategy that is quite different from competitors.
It is important for a commercial mortgage broker to note that specialization involves the exercise of knowing, understanding and focusing on the core competencies required to serve specific customer needs. The idea is to leverage unique capabilities in the conduct of business in order to achieve appreciable efficiency and a sustainable competitive advantage. The basic assumption of specialization is that the broker need not be everywhere doing everything for everybody in order to succeed.
One popular government-sponsored lending source deserving attention when targeting the foreign-national market is the U.S. Small Business Administration (SBA) and its 7(a) and 504 loan-guarantee programs — which can provide financing for commercial real estate projects. The SBA-guarantee programs are available to most businesses owned by U.S. citizens, including naturalized citizens. All that is needed is for potential borrowers to confirm their U.S. citizenship on SBA Form 912 (the Statement of Personal History), which is one of the forms that all business owners need to file when requesting SBA-guaranteed financing.
This should not be interpreted to mean, however, that business entities owned or controlled by non-U.S. citizens are automatically ineligible for SBA backing. Such businesses may be eligible if the owners are in the country lawfully, and both the owners and management of the company meet certain other conditions. In order to confirm eligibility for these individuals, the SBA and the lenders work with USCIS.
Specialization perks
Commercial mortgage brokers who are successful in implementing specialization strategies, such as targeting the foreign-national borrower market, acquire an in-depth understanding of the market segment they target. This allows them to define a business focus, allowing the brokers to prosper in niches where specific knowledge can best serve the needs of smaller but underserved markets — while generally ignoring opportunities outside one’s specialty.
Through specialization, the broker also acquires the insight to determine what must be done to satisfy the needs, wants and expectations of the target market. Specialization also is a method of controlling delivery costs, possibly to the disadvantage of many competitors.
In addition, specialization helps to bolster productivity through increased understanding of markets, products and procedures. That can lead to more closed loans in less time, thereby increasing per-employee revenue.
If treated well and provided quality service, clients will share the news of their good fortune with friends, relatives and business associates. Word of good experiences travels fast, especially for something as big as the financing for a commercial property.
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Specialization in the mortgage business can take many forms, including zeroing in on the burgeoning foreign-national market. Maybe the two most important issues for a commercial mortgage broker to consider when going that route are as follows: First, identify the market, its size and the level of competition; and, second, determine whether you have the skills, unique knowledge and ability to meet the market’s needs. If so, you have the ingredients for success.
