USDA cuts home loan access for non-citizens

In a continued effort to reshape housing policies, the Trump administration has rolled back a USDA waiver that allowed some non-citizens to access government-backed home loans.

Effective immediately, the USDA terminated a waiver that allowed some non-U.S. citizens, including those with a valid social security number and work authorization, to apply for a rural housing-related mortgage. 

As a result, Pennymac, which operates in the correspondent lending space, warned partners it will no longer be able to fund these loans because of the change.Pennymac will still purchase loans for non-citizens if all conditions were met before March 18. However, loans that miss this deadline—including refinances—are now ineligible.This move aligns with the administration's broader immigration policies and efforts to scale back diversity and equity-related programs. 

The Federal Housing Administration, which gives Deferred Action for Childhood Arrivals recipients with U.S. work permits access to loans it insures, has yet to change its policies.During Trump's first presidency, there was an attempt made to terminate DACA, but the Supreme Court ruled against the move 5-4 in June of 2020, finding that it was in violation of the Administrative Procedure Act, among other things.

While this policy change limits mortgage options for non-citizens, some alternatives remain, albeit with higher costs and stricter terms. One of those is Individual Taxpayer Identification Loans, or ITIN products. 

A small yet growing set of lenders offer mortgage products to ITIN holders, often at higher interest rates and with stricter lending requirements, Urban Institute wrote in a report. Lenders such as CrossCountry Mortgage and Guild Mortgage are the largest nonbanks touting the product.

The nonprofit estimates that 5,000 to 6,000 ITIN mortgages were made in 2023, but this could be up to 73,000 to 88,000 if some market barriers, such as a lack of a secondary market, were removed. 

As government-backed options shrink, the private sector may expand ITIN lending but significant barriers remain, limiting accessibility for many non-citizen borrowers.