Bank Regulators, Trade Association Advise on Lending to Unauthorized Workers

The OCC, the FDIC, and the NCUA issued guidance on the credit risks of lending to people not legally authorized to work in the United States.

The agencies stated they acted under the executive order "Restoring Integrity to America's Financial System" (see prior coverage). The agencies said lending to borrowers without work authorization may carry higher credit risk because their income and employment may be less stable.

The agencies set out several underwriting points:

• Wages from unauthorized employment may be a less reliable source of repayment, since a borrower could lose a job, fail to be rehired lawfully, or be removed from the country and lenders should test repayment capacity against those scenarios.
• Collateral may be harder to recover because lenders may struggle to reach borrowers or repossess autos, recreational vehicles, or boats.
• Lenders may seek documents such as paystubs, W-2s, tax returns, and evidence of continuing work authorization. The lenders may classify weak loans in this group regardless of delinquency.
• A lender with heavy exposure to borrowers grouped by geography, employer, or industry could face correlated losses if immigration enforcement targets that category of borrowers.

The agencies also pointed to consumer-compliance duties, citing the CFPB's June 8, 2026, statement on ability to repay and immigration status (see prior coverage). They said the Truth in Lending Act requires a good-faith ability-to-repay finding for mortgages, and that under the Equal Credit Opportunity Act a creditor may consider an applicant's immigration status. They advised institutions to review the CFPB statement.

Separately, in a column, the American Bankers Association addressed how a bank should state its reason when it denies a mortgage over an applicant's inability to verify legal residency or work authorization.

The column described a non-permanent resident who applied for a home loan with strong credit, steady employment, and consistent income. The bank denied the loan over concerns about income continuity after weighing the CFPB's recent statement on ability to repay and immigration status and asked whether the notice should cite "insufficient income" or "immigration status."

The ABA argued the bank should cite neither if those are not the real reasons, noting that Regulation B (Equal Credit Opportunity Act), requires the adverse-action notice to state the specific principal reason for denial. The ABA argued that the reason for the denial was not the level of current income but the bank's inability to determine that the income would continue and that "insufficient income" would be inaccurate.

The ABA noted that citing "immigration status" would also be wrong if that was not the reason. Income-continuity concerns are not unique to immigration status and arise with temporary or seasonal income. The ABA said naming immigration status could suggest an unlawful basis, noting that Regulation B lets a creditor consider immigration status to assess repayment rights and remedies, but not to discriminate on race or national origin, and that some states bar immigration-status discrimination.

The ABA said a stronger approach is to tie the reason to the bank's underwriting and its ability-to-repay finding under Regulation Z (Truth in Lending Act). The ABA explained the bank's notice could state that the bank was "unable to determine continuation or stability of income." The ABA noted the underlying policy should rest on income stability and repayment capacity, be applied consistently, and be well-documented.