www.marktreichel.com https://www.linkedin.com/in/mark-treichel/ Hello, this is Samantha Shares. This episode covers Interagency Guidance on Lending to Individuals Not Legally Authorized to Work in the United States. The following is an audio version of that document. This podcast is educational and is not legal advice. We are sponsored by Credit Union Exam Solutions Incorporated, whose team has over two hundred and forty years of National Credit Union Administration experience. We assist our clients with N C U A so they save time and money. If you are worried about a recent, upcoming, or in process N C U A examination, reach out to learn how they can assist at Mark Treichel dot com. Also check out our other podcast called With Flying Colors where we provide tips on how to achieve success with N C U A. And now the document. Federal Deposit Insurance Corporation. National Credit Union Administration. Office of the Comptroller of the Currency. July thirteenth, twenty twenty-six. Interagency Guidance on Lending to Individuals Not Legally Authorized to Work in the United States. On May nineteenth, twenty twenty-six, the President issued the Executive Order, Restoring Integrity to America's Financial System, to address risks to the financial system posed by the extension of credit or financial services to the inadmissible and removable population. In accordance with the Executive Order, the Office of the Comptroller of the Currency, Treasury, referred to as the O C C, the Federal Deposit Insurance Corporation, referred to as the F D I C, and the National Credit Union Administration, referred to as the N C U A, and collectively referred to as the agencies, are issuing this guidance to remind supervised financial institutions of their existing obligations with respect to credit risk management, particularly as it relates to borrowers who are not legally authorized to work in the United States, referred to as non-work authorized borrowers. Credit Risk and Underwriting Considerations. Lending to individuals who are not legally authorized to work in the United States may present elevated credit risk because a borrower's ability to generate income, maintain employment, and remain financially stable may be subject to greater uncertainty. As with all lending activities, financial institutions should identify, measure, monitor, and control these risks through safe and sound underwriting practices that assess a borrower's willingness and capacity to repay according to the terms of the credit obligation. Safe and sound underwriting is a key risk-management tool that helps financial institutions evaluate whether a borrower can repay a credit obligation according to its terms. Such underwriting includes assessing the source of repayment, the borrower's repayment capacity, and the borrower's overall financial condition, resources, and willingness to repay as agreed. When lending to non-work authorized borrowers, financial institutions should consider whether uncertainties related to employment authorization may affect the stability and sustainability of income, repayment capacity, collateral recovery, or other factors relevant to credit risk. The following sections discuss key underwriting considerations related to the source of repayment, collateral considerations, documentation and verification, portfolio and concentration considerations, and consumer compliance risk. Source of Repayment. Underwriting standards typically consider the stability and sustainability of a borrower's income and the likelihood that the income will continue throughout the term of the credit obligation. In retail lending, wages or self-employment income are often the primary source of repayment. When a borrower's income is derived from employment that is not legally authorized, the source of repayment may be less reliable and may present increased credit risk for various reasons, including: employment termination due to an employee not having legal work authorization; employment suspension or termination after discovering that an employee's employment authorization is expired; the borrower's inability to become lawfully reemployed; or the borrower's removal from the United States. Financial institutions should consider whether projected repayment capacity remains adequate under various scenarios including potential interruptions in employment or income resulting from the borrower's inability to maintain lawful employment. Collateral Considerations. Financial institutions may face additional challenges enforcing security interests in collateralized loans, as it may be more difficult to contact non-work authorized borrowers or locate and repossess unaffixed collateral, such as automobiles, recreational vehicles, and boats. Documentation and Verification. Financial institutions might consider whether employment income is current, verifiable, stable, and likely to continue. Financial institutions might consider, as relevant, requiring and reviewing paystubs, W two forms, tax returns, employer verifications, bank statements, or evidence of continuing work authorization. Financial institutions may consider whether loans to non-work authorized borrowers, individually or in segments, exhibit signs of credit weakness regardless of delinquency status for classification purposes and treatment in the allowance for credit losses. Portfolio and Concentration Risk Considerations. Financial institutions with significant lending exposure to borrowers concentrated in specific geographic markets, employers, or industries that may be disproportionately affected by changes in immigration enforcement, employment verification practices, labor availability, or workforce disruptions may face elevated concentration risk. These changes could adversely affect the repayment capacity of multiple borrowers simultaneously. As a result, financial institutions may experience correlated credit deterioration within affected segments of the portfolio rather than isolated borrower-level stress. Consumer Compliance Risk. On June eighth, twenty twenty-six, the Consumer Financial Protection Bureau, referred to as the C F P B, issued the Statement on Ability To Repay and Immigration Status, to remind creditors of their obligations under the Truth in Lending Act, referred to as T I L A, as implemented by Regulation Z. As the C F P B observes, under T I L A and Regulation Z, before lending to consumers for dwelling secured transactions like mortgages, creditors must make a reasonable and good faith determination at or before consummation that the consumer will have a reasonable ability to repay the loan according to its terms. Regulation Z sets forth parameters that lenders must follow to make such reasonable and good faith determinations of a customer's ability to repay applicable consumer credit products. Further, the C F P B advises that credit card issuers must consider the consumer's ability to make required minimum periodic payments. The C F P B advises that, when determining repayment ability, creditors relying on an individual's income derived from United States based employment are permitted, and may, under certain facts and circumstances, be obligated, to consider information that bears on the consumer's underlying and continuing ability to earn income, when residency in the United States is a necessary component of such employment. With respect to the Equal Credit Opportunity Act, referred to as E C O A, as implemented by Regulation B, the C F P B observes that E C O A expressl...
