If you have applied for a mortgage, you know that lenders scrutinize everything from your credit score to your employment history before approving a loan. For a growing segment of borrowers who use Individual Taxpayer Identification Numbers (ITINs), that level of scrutiny just became significantly more complicated and uncertain.Three top banking regulators issued joint guidance on July 13, instructing banks to treat the lack of work authorization among unauthorized immigrants as elevated credit risk.The Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA) expect lenders to factor deportation risk into their underwriting decisions.The guidance builds on President Trump’s May executive order titled “Restoring Integrity to America’s Financial System”, which ordered regulators to scrutinize immigrant lending. Yet it arrives alongside a growing body of research suggesting that the borrowers it targets may be among the most dependable in the lending system.Regulators frame unauthorized borrowers as elevated credit riskThe agencies released their joint statement ahead of the July 18 deadline established by the executive order, and the language left little ambiguity about expectations.Income from unauthorized employment may be less reliable and may present increased credit risk, the OCC, FDIC, and NCUA stated in their joint guidance.Jonathan Gould, Comptroller of the Currency, says banks must uphold their longstanding responsibility to identify and understand customers.Banks have an obligation to know their customer. That’s a pre-existing obligationThe guidance does not create new lending rules, nor does it prohibit banks from serving borrowers who lack legal work authorization in the country.Borrowers who use ITINs instead of Social Security numbers could face larger down payments, higher interest rates, or loan denials, depending on bank interpretation.ITIN borrowers default at rates far below the national averageThe guidance frames ITIN-based lending as a source of elevated risk, but borrower data complicates that conclusion in significant and measurable ways, according to Experian research cited in coverage of the guidance.About 76.9% of ITIN holders remained current on their credit obligations after 12 months, a rate 15% higher than that of Social Security number borrowers. ITIN holders also maintain a 25% debt-to-income ratio, which falls below the corresponding average for traditional borrowers, Experian’s research found.Community lenders offering ITIN mortgages have historically reported low delinquency and default rates. Latino Community Credit Union and Guadalupe Credit Union both posted rates well below national averages.Those low rates stem from stricter qualification standards, since ITIN borrowers put down between 10% and 20% of a home’s price, the Urban Institute noted. The market remains small, with roughly 5,000 to 6,000 ITIN mortgages originated in 2023 out of about 4.6 million total originations that year, according to the National Community Reinvestment Coalition.
ITIN mortgage borrowers often outperform expectations, with lower default rates, stronger repayment histories, and stricter lending standards than many traditional borrowers.Oscar Wong/Getty Images
Critics warn guidance creates conflicting compliance obligationsConsumer groups and mortgage industry participants have pushed back against the guidance, arguing it creates conflicting obligations for lenders trying to remain compliant.In a June statement responding to a related CFPB advisory, Chi Chi Wu, director of consumer reporting and data advocacy at the National Consumer Law Center, called that guidance “clear as mud, criticism NCLC has extended to the interagency approach broadly.That tension carries legal weight because the Equal Credit Opportunity Act bars lenders from discriminating on the basis of national origin in consumer credit decisions. More Fed:Supreme Court hands Fed independence a major victoryTop economist delivers blunt Fed rate warning for 2026Inflation flips Wall Street’s Fed interest-rate betsJob loss for any credit applicant is more likely than deportation, which undermines immigration status as a predictor of creditworthiness, the National Consumer Law Center argued.Andrew Dort, owner of the Las Vegas-based mortgage brokerage Pride Lending, told National Mortgage News in June, citing earlier CFPB and FinCEN advisories, that lender behavior could shift even without a binding legal mandate. “I have not seen anyone shift away from the product, but I think it’s only a matter of time, even though these advisories are not binding,” Dort said.Speaking to National Mortgage News in June about the earlier CFPB and FinCEN advisories, Manan Shah, policy advisor at the National Community Reinvestment Coalition, said they served as “a pretext for excluding hard-working immigrants from accessing credit.”Legal challenges and compliance costs loom for banksCivil rights groups are evaluating multiple legal challenges, including claims under the Equal Credit Opportunity Act and the Fair Housing Act for mortgage-related discrimination. Administrative Procedure Act suits could follow if regulators finalize new rules without conducting required public comment periods, the National Consumer Law Center indicated.Banks face rising compliance costs regardless of how aggressively they choose to enforce the new standards in their lending operations. The industry successfully lobbied against an earlier executive order draft that mandated nationwide collection of citizenship data from all bank customers.The next regulatory milestone arrives 90 days after Executive Order 14406, when the Treasury must propose changes to the Bank Secrecy Act customer due diligence rules for banks.Whether you are a borrower with an ITIN or a homebuyer navigating today’s market, banks’ responses to this guidance will shape your lending options.Related: Americans face major decision with mortgage rate news