Is The buyer a U.S. Citizen? Is it unethical to ask?

Hi Greg - I've had to deal with this issue twice in the last month. The first was a buyer (mine) who, it turned out, couldn't get a loan because he had the wrong kind of visa to qualify - and I asked and we dealt with it before starting to look. The second is a buyer (also mine) who is paying verified cash - no problems, and I also asked, and we discussed the impact on his proceeds (automatic 10% withholding to IRS) in an eventual sale. It was a material issue in both deals and it would not have served anyone well in leaving the issue undiscussed.

Great question Greg.  National Origin is a protected class under the Fair Housing Rules.  Basically you cannot reject an offer to rent or sell from a buyer/tenant based solely on their national origin.  Rejecting based on lack of citizenship...would/could that be considered the same thing? That's a slippery slope.

Greg - Heck yeah you can question someone's citizenship.  Lenders/MLOs do it all the time.  While it is not illegal for foreigners to buy US properties, there is a specific process to it.  As a listing agent, you should know that and should be asking the buyers lender this question.

As an MLO, I am just dumbfounded that more LAs are not contacting me about my borrowers pre-approvals.  Yes, I do get some calls and, of course, there are those who have been asked to pre-approve with the LAs fave lender.  With those scenarios sometimes I can talk to the LAs fave lenders about what I have done and provide some verifying documentation; other times they won't speak to me and my borrowers typically move on then.

However, there are so many others who are not calling me and I just find it really odd.  LAs are constantly complaining about how our pre-approval letters are so worthless yet so many problems can be detected in one conversation with the MLO to find out what they have done, like ask if the borrower is a US citizen or not.  This is something that is verified upon taking an app.

Foreigners are not a protected class?!?  National original IS . . . and that's just another way of saying "foreign born" aka foreigners.  GEEZ, the level of intellect is amazing.

Greg -- When we are doing a loan application, we ask if they are a US Citizen, and if not, if they are a "Permanent Resident Alien".  These are part of set of questions, that let us know in advance if there are going to be issues that need to be explored/explained more deeply with the underwriters.

It's none of my business if the buyer is not a US citizen, much less what country he's from. However, if he's trying to get a mortgage, his loan officer should find out right away. Sounds like it was just another reason for the financing to fall through. I just had a deal fall through 3 days before closing for a similarly bizarre reason.

Cheers,

Robin

Donne and Greg hit it!  The citizenship question is asked on the loan application (form 1003) on day one of the application process.  Then LOs have to view the borrowers ID (usually Social and Driver's License) and copy it for the Underwriter.  If the LO is doing their job, there is no excuse for finding out at the end of the transaction that citizenship is a problem.

Its a question on every loan application that must be answered.  Realistically, if the borrower lies, it might not be discovered. 

One way of detecting a citizenship issue is by looking at the credit report to get the issue date of the Social Security number.  If the SS # was recently issued, then the underwriter may ask for additional documentation.  Its definitely possible that they lied on the initial application then could not provide the documentation once requested.

Just to add onto what others have said... with us loan officers not being immigrations experts, it could be that the LO was told at the time of application that the Borrower was not a citizen, but that citizenship was pending or imminent.  Whether or not this was true is a seperate issue.  Definately something I would try to investigate if I was presented with it, but I imagine it's not an easy question to answer or address if you are not familiar with the process and related paperwork.

I would also think that if this became a frequent problem, rather than asking if somebody is a citizen only when you see a "foreign looking" name, you could just ask everyone if they are a citizen so that you can't be accused of discrimimation.

Greg, as always with you, this is a HUGE question! LOL! This is really sticky. Wasn't there something else that could have been done by postponing the closing and getting the official "okay"?

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Greg, As a Lender we are required to ask this question on each and every loan application.  If we don't we can actually loose our license!  You are not out of line for asking the loan officer if they buyers are.

Greg,

Actually I agree in theory with BB.  Citizenship is not mentioned in Fair Housing.  Citing National Origin is assuming they are of some origin like Hispanic.  They may very well be from the UK.  However citizenship is not a protected class.  I would get an opinion from you attorney.

Depending on what the 3rd party financing is, I think that's what it goes by. We are a country made up of all types of names. You wouldn't have known to ask if this was an American citizen.

Hmmm... seems the lender would have verified if they had the proper documentation to in order to get the mortgage. 

Interesting question. In light of this experience, I am sure that the next time you will hear a warning bell. As long as you ask politely for verification of citizenship from the lender that has done the pre-qualification, I see it as protecting your seller.