Federal regulators have issued guidance warning banks about the potential risks of lending to individuals without legal work authorization in the United States. The Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA) jointly stated that income derived from unauthorized employment may be less reliable, posing increased credit risk.
The guidance, released on Monday, emphasizes that financial institutions must adhere to existing prudential underwriting standards, including assessing a borrower’s ability to repay loans. It highlights scenarios such as job loss due to immigration status or deportation as factors that could affect repayment.
The agencies clarified that the guidance does not impose new requirements but serves as a reminder of existing obligations. Critics argue that such guidance could deter banks from lending to unauthorized immigrants, even those with stable income, and may push financial transactions outside the regulated banking system.
The move aligns with a broader Trump administration effort to use financial regulations to enforce stricter immigration policies. While the guidance does not mandate banks to collect citizenship data, it underscores the need for vigilance in assessing credit risk.
Most mortgages require borrowers to have a Social Security number, but some loans can be obtained using an Individual Tax Identification Number (ITIN). Data on undocumented immigrants’ access to loans remains scarce due to the lack of mandatory citizenship reporting by banks.