KBRA releases research analyzing the growing presence and credit performance of non-U.S. citizen borrowers in private-label residential mortgage-backed securities (PLS).

Key Takeaways

• Noncitizen borrower exposure has increased sharply (2.5x) over the past five years, rising from minimal levels in the mid-2010s to meaningfully higher shares in recent vintages. Noncitizen exposure is heavily concentrated in non-prime PLS transactions, where the combined share of noncitizen borrower types approaches 13.6% of the collateral pools.
• There are no federal laws prohibiting mortgage lending to noncitizens, and core regulations—such as the Ability-to-Repay (ATR) rule and fair lending laws—apply regardless of immigration status. While a few states restrict property ownership for certain foreign nationals, homeownership and foreclosure processes for noncitizens is generally the same as for U.S. citizens, with no legal barrier to lien enforcement.
• Foreign nationals have the highest default rate at 4.6%, compared to 1.7% for U.S. citizens. This elevated default risk may reflect lower owner-occupancy (13.1%), reliance on foreign income, and limited credit history, while the strong performance of permanent residents likely stems from favorable attributes such as higher full documentation (21.5%) and owner-occupancy (63.5%).
• ITIN borrowers face elevated default risk due to policies that may disrupt residency stability and restrict access to refinancing or traditional loan options. Exposure to ITIN loans remains minimal in RMBS and has been confined to non-prime transactions. Although performance has been positive to date (virtually no defaults or losses), the dataset is very limited, warranting continued observation in today’s shifting political environment.

Click here to view the report.

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About KBRA

KBRA, one of the major credit rating agencies, is registered in the U.S., EU, and the UK. KBRA is recognized as a Qualified Rating Agency in Taiwan, and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

Doc ID: 1011186

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