CHICAGO - Largely lost in the build-up to the Iowa caucuses was a moment that could ultimately prove decisive in this year's presidential election: Mitt Romney's threat to veto the DREAM Act, a bill that would provide a path to citizenship to some undocumented children of immigrants who attend college or serve in the military.

Latinos are the nation's fastest growing voting group - with an estimated 12 million set to vote in the election - and, predictably, Democrats have pounced on Romney's stance.

The Obama campaign this week dubbed Romney the most extreme GOP candidate on the immigration issue, and leading Latino Democrats said the former Massachusetts governor's immigration approach will hurt his standing among Hispanics.

"It really demonstrates how far he is from understanding the issue," the chairman of the Congressional Hispanic Caucus, Rep. Charlie Gonzalez of Texas, said Wednesday on a conference call with reporters. "I understand in that particular field one will try to out-pander another, but you still have to be responsible."

"How do you paint yourself in such a corner on immigration where you can't walk back from that statement?" he asked.

Republicans contend that the bill would unfairly grant "amnesty" to illegal immigrants, but Romney's stance is already alienating some Latino voters, to say nothing of Democrats and independents who largely support the measure.

Des Moines, Iowa, businessman Juan Rodriguez, a Republican voter frustrated with the harsh rhetoric on immigration from some of the GOP candidates, said he would not back Romney because of his threatened DREAM Act veto.

"My business depends on Hispanics, basically, and if there's no immigration reform we are going to be very affected - not just me, but all the businesses that depend, like us, on the Latino community," Rodriguez said.

"I wouldn't vote for Romney because he doesn't support immigration reform or the Dream Act," he added.

Instead, Rodriguez backed Romney's rival, Newt Gingrich, in the Iowa caucuses. The former House speaker has been the lone GOP candidate to voice support for an immigration reform plan that would implement the DREAM Act.

"I can't opine on why Romney does or does not support the DREAM Act," said Sylvia Garcia, who heads up Hispanic outreach for Gingrich's campaign, in a Spanish-language interview. "That is up to each person, each citizen, each voter to make their own decision about what's most important to them.

"Newt thinks that the people who have come here, joined our armed forces, and things like that, deserve the possibility of citizenship that the DREAM Act offers," Garcia said.

Even Obama supporters upset with the president's inaction on immigration reform - including Jose Zacarias of West Liberty, Iowa, the state's first majority Latino town - believe that the Republican field's views - Gingrich aside - will help Democrats.

"Mr. Obama made a lot of promises to Hispanics in 2008 - immigration reform, to get a chance for more people to become legals," Zacarias said in an interview.

"The president should have focused more on Latino issues like immigration and the famous DREAM Act," he added. "He spent too much time politically on the issue of universal health care and almost no time on Latino issues."

Despite his frustration with Obama, Zacarias will support his re-election bid because Republicans, in his opinion, haven't offered Latinos a better option.

"I don't think any Hispanic in his right mind is going to vote for Rick Perry or Romney," he said. "It might be a tough sell, but I think the GOP is helping a lot by putting those guys forward."

Matthew Jaffe is covering the 2012 campaign for ABC News and Univision.