Immigrant Program ‘No Cakewalk,’ Says Wells Fargo Executive

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Bank of America stirred up controversy recently when it announced it would be offering credit cards to undocumented immigrants through a pilot program in Los Angeles County. Now, Wells Fargo & Co. is considering such a program of its own. It’s not the first time the San Francisco-based bank has waded into this territory. In 2005, it began a pilot program offering home loans to undocumented immigrants. That program, with relatively tight lending requirements, failed to attract much interest as the housing market has slumped. The Business Journal discussed these and other issues with Shelley Freeman, the bank’s regional president in Los Angeles.



Question: So what is the status of your credit card program?


Answer:

We’ve definitely looked at it. You have a segment of the population that is growing and we want our offerings to grow to credit cards and investment services and everything else.



Q: But what about the criticism leveled at Bank of America?


A:

I think at some point everyone gets criticized for trying something new, particularly on an issue as emotionally galvanizing as concessions for immigrants. When you have underserved communities, filling a service niche is not only good business but there are moral implications as well. This population group’s growth is a reality and by offering these services, we’re dealing in reality.



Q: Somehow it seems odd that typically conservative financial institutions are publicly spearheading services to undocumented immigrants.


A:

I think that financial institutions have led the way in serving the immigrant community from a retail standpoint. Case in point, we were the first bank, in November 2001, to accept the Mexican consular I.D. Card. In fact we’ve become the first U.S. Bank to accept Mexican, Guatemalan, Argentine and Colombian consular I.D. cards as acceptable identification to open checking accounts. The background on this is important because we, like a lot of financial institutions, began to offer these immigrants banking services at the request of law enforcement.



Q: The request of law enforcement?


A:

In Austin the police came to Wells Fargo and said, “We have a lot of crime taking place in our immigrant community because a segment is walking around with a lot of cash because they can’t bank or don’t want to.” There’s this cash-based economy that can be a danger for the community. So we said we’d look into it and we ended up working with the Mexican consulate and making sure their I.D. met the same security standards as say a California Driver’s License does for local citizens. We have machines now in local branches that can validate identification cards. What started in Austin later expanded to Los Angeles and we went on from there nationwide.



Q: What other services are you offering to this community?


A:

Well, all sorts of deposit relationships. One thing that was pretty big for us is that we got into money transfer products. Many immigrants and descendants of immigrants send money back and forth so we have many products and services that enable people to do that. It’s an alternative to the more expensive options like check-cashing places that take a $25 service charge when you’re just sending $300.



Q: Where did your mortgage program go wrong?


A:

We offered the product and as time went on, we had a 75 percent loan-to-value and then it moved to 90 percent. We essentially retrenched on the project because we haven’t seen much demand for the product. And we’ve written very few loans thus far. The housing market has softened and loan-to-value ratios we look at tend to be tighter and we have higher standards than typical lenders. Additionally, it’s just a lack of demand. In under banked communities, some are squeamish about sitting down and creating a paper trail. I also think that getting the down payment together is also a challenge for some of these customers. We even looked at going to a 95 percent loan-to-value ratio but given the current climate, we balked at that. This may be a program for immigrants but it’s no cakewalk.



Q: What do you mean by no cakewalk?


A:

To qualify you have to have been a Wells Fargo customer for one year and you have to provide two years of tax returns. You have to have a track record of financial reliability in terms of your account activity. You don’t need to have a social security number but you do need to have a history of paying taxes and keeping the account solvent.



Q: What’s the program’s future?


A:

We haven’t discontinued the program. We want to continue to offer mortgages to this segment because we continue to believe that home ownership is the cornerstone of building wealth in this country. There are a lot of good things in the way of education and development that can happen in a community when it is full of home owners.



Q: How important is this population as you look ahead?


A:

It’s very important. (Immigration) is a very controversial issue. People on both sides of the issue have strong views about it. We try not to take sides. We try to stay impartial and make smart decisions that benefit our banks and depositors and our shareholders. But it’s important to continue to serve customers of all backgrounds and treat everybody equally and make prudent decisions instead of just chasing after a population segment because it represents a large market. It’s when you try to exploit a particular group or opportunity that things go awry.

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