Immigration status is emerging as a closely monitored issue in lending compliance. As regulators revisit guidance in this area, financial institutions should understand how ability-to-repay expectations, fair-lending obligations and documentation standards may intersect.
Our Compliance Team answers three key questions on the subject.
Ability-to-Repay determinations under the Truth in Lending Act (TILA) and Regulation Z are drawing attention when verified repayment capacity intersects with immigration status, employment authorization and income continuity.
The issue is worth watching because of its potential impact on underwriting, fair lending, documentation and regulatory interpretation.
Regulation Z requires creditors to assess a consumer’s ability to repay before extending mortgages and certain open-end credit products. They must base their decision on verified information about the consumer’s income, assets, employment and other relevant repayment factors.
This regulation outlines the standards lenders must follow when making fair and good-faith assessments of a consumer's ability to repay.
ECOA and Regulation B explicitly permit creditors to consider an applicant's immigration status. These regulations state that creditors "may consider the applicant's immigration status, status as a U.S. permanent resident, or lawful authorization to work or stay in the U.S., along with any other information necessary for understanding the creditor's rights and remedies related to repayment."
Their assessment must be individualized, evidence-based and supported by documented underwriting standards.
The main point is that immigration status might be relevant in specific, fact-dependent situations when it significantly impacts repayment ability, ongoing income or enforceability. Regulatory and fair-lending issues remain important to monitor.
We’re keeping an eye on this, and we know you will, too.
Have questions about this evolving lending compliance topic?
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