Examiners Are Now Asking About Your Non-Work-Authorized Borrower Portfolio: What the July 2026 Interagency Guidance Requires

TL;DR

• On July 13, 2026, the OCC, FDIC, and NCUA issued interagency guidance requiring financial institutions to apply safe-and-sound credit risk practices when lending to borrowers not legally authorized to work in the US
• The guidance was issued in response to a May 2026 White House Executive Order and follows a June 8, 2026 CFPB statement on ability-to-repay and immigration status under TILA and ECOA
• ECOA expressly permits lenders to consider immigration status when relevant to creditworthiness — but also prohibits using it as a proxy for national origin; the examination focus will be on whether your underwriting is specific and documented
• Five program areas need explicit coverage: underwriting, account management, credit classification, allowance analysis, and fair lending compliance monitoring

The Guidance Is Framed as a Reminder. Your Examiners Will Treat It as a Checklist.

When federal banking regulators issue “interagency guidance reminding supervised financial institutions to apply existing safe-and-sound credit risk management practices,” the operative word is often “existing.” The agencies aren’t creating new legal requirements — they’re signaling examination priorities.

The practical reading of the July 13, 2026 guidance from the OCC, FDIC, and NCUA is this: if you lend to borrowers who are not legally authorized to work in the United States, examiners are now going to specifically ask how your institution manages that credit risk. If your answer involves a policy that was written without this population in mind, documentation that doesn’t distinguish this segment from your general portfolio, or an allowance for credit losses that doesn’t include any qualitative adjustment for the specific risks involved — that’s a finding.

The regulatory context makes clear this isn’t going away. The guidance was issued directly in response to a May 19, 2026 Executive Order signed by President Trump, “Restoring Integrity to America’s Financial System,” which directed federal financial regulators to address risks from extending credit to non-work-authorized individuals. The CFPB issued its own statement on June 8, 2026, addressing how ability-to-repay requirements under TILA and ECOA apply when a borrower’s income depends on their work authorization status. This is an administration priority with multiple regulatory touchpoints, not a one-cycle focus area.

Who the July 13 Guidance Applies To

The guidance applies to all institutions supervised by the OCC, FDIC, and NCUA — national banks, state-chartered banks, federal savings associations, and credit unions. It covers lending products broadly: mortgage, auto, personal installment, credit card, and business credit where the borrower is a natural person.

The most common factual scenario: a fintech or community bank that serves immigrant communities and extends credit to borrowers who have Individual Taxpayer Identification Numbers (ITINs) rather than Social Security Numbers. ITIN holders include both lawfully present individuals (like certain visa holders) and individuals without work authorization. Many lenders who accept ITINs haven’t clearly distinguished in their credit policies between these populations — and haven’t tracked portfolio performance separately by work-authorization status.

That’s the gap the guidance is pointing at.

What the Credit Risk Concern Actually Is

The agencies identified a specific, legitimate credit risk: income discontinuity. Non-work-authorized borrowers may face enforcement actions that disrupt their ability to work legally in the United States, which could interrupt income and impair their ability to repay.

This is a real credit risk factor in the same way that employment status, income stability, and debt-to-income ratio are credit risk factors. The guidance explicitly frames it this way: “their ability to generate income, employment continuity, and financial stability may be more uncertain.”

The guidance requires institutions to incorporate this into five areas:

Underwriting. How does your credit decision process evaluate income continuity risk for non-work-authorized borrowers? Your underwriting guidelines should have an explicit answer — not a default assumption that the income documentation submitted at origination is sufficient to assess long-term repayment capacity.

Account management. How does your servicing process identify and respond to changes in a borrower’s work status during the loan term? This is harder operationally, and most credit policies don’t address it. The guidance doesn’t require institutions to continuously monitor work authorization status, but it does suggest that if other credit risk indicators suggest deterioration, work authorization status is a relevant factor to consider in account review.

Credit classification. How are loans to non-work-authorized borrowers classified within your loan grading system? If these loans perform differently than your general portfolio — higher delinquency rates, different charge-off patterns — your classification methodology should reflect that. A substandard classification based on income continuity risk may be appropriate for certain loan types before the loan is actually delinquent.

Allowance analysis. Does your allowance for credit losses include a qualitative factor or segment adjustment for non-work-authorized borrower exposure? Under CECL, qualitative adjustments are appropriate when quantitative models don’t fully capture identifiable portfolio risks. A specific credit risk associated with a defined borrower population — one that regulators have explicitly identified — is exactly the kind of thing qualitative adjustments exist for.

Compliance monitoring. Can you demonstrate that your treatment of non-work-authorized borrowers is consistent and documented? This is the fair lending dimension, and it’s significant.

The ECOA Tension: What the Agencies Actually Said

ECOA prohibits discrimination in credit based on national origin, among other protected characteristics. Immigration status and work authorization status are closely correlated with national origin in many populations. The agencies and the CFPB both addressed this directly.

The CFPB’s June 8 statement and the July 13 guidance both confirm that ECOA expressly permits creditors to consider an applicant’s immigration status when it’s relevant to creditworthiness and when that consideration is applied as a specific credit factor rather than a categorical bar.

The regulatory text from ECOA and Regulation B explicitly states: “A creditor may consider the applicant’s immigration status or status as a permanent resident of the United States and any additional information that may be necessary to ascertain the creditor’s rights and remedies regarding repayment.”

The key phrase is “rights and remedies regarding repayment.” This means immigration status is relevant when it affects the lender’s ability to collect — not as a stand-alone characteristic that determines credit worthiness. The line between “considering immigration status because it creates specific income continuity risk” and “excluding applicants based on immigration status in a way that functions as national origin discrimination” is where examination and enforcement focus will land.

Institutions that can demonstrate they’re doing the former — with documented underwriting logic, applied consistently, based on specific repayment capacity analysis — are in a defensible position. Institutions that have informal practices, undocumented decisions, or outcomes that produce disparate impact on national-origin groups without documented business necessity are exposed.

What the CFPB’s ATR Statement Added for Mortgage Lenders

The CFPB’s June 8, 2026 statement focused specifically on obligations under TILA/Regulation Z’s ability-to-repay requirements for closed-end mortgage loans. The statement clarified that where a borrower’s income depends on their presence and lawful ability to work in the United States, creditors may — and in some cases should — consider whether that income is likely to continue for a sufficient period after consummation.

This has a specific implication for ITIN mortgage programs. Many community development financial institutions (CDFIs), credit unions, and community banks have run ITIN mortgage programs for years. These programs typically rely on alternative documentation of income (tax returns, bank statements) and accept ITINs from borrowers without Social Security Numbers.

For these programs, the ATR question is whether the income documentation you’re relying on remains a reasonable predictor of ongoing repayment capacity — and whether the borrower’s ability to earn that income could be interrupted by a change in work authorization status. The CFPB didn’t say these programs are prohibited or that ITIN mortgage lending is high-risk per se. It said that where the income’s continuity is tied to work authorization, that’s a relevant factor in the ATR analysis.

What Examiners Will Actually Look For

Based on the guidance language and the regulatory environment, here’s the examination checklist you should be running now:

If your institution doesn’t currently lend to non-work-authorized individuals, the examination focus shifts: can you document that as a credit policy decision (not a discriminatory one), and do your lending outcomes confirm you’re applying it consistently rather than making case-by-case exceptions?

Building the Risk Management Framework

For institutions with material exposure in this segment, the following framework reflects the guidance requirements:

Portfolio segmentation. Separate out non-work-authorized borrowers from your general portfolio in your risk reporting. You need performance data by segment before you can assess whether there’s elevated risk, and you need that data to support any qualitative allowance adjustment.

Credit policy update. Add explicit language to your credit policy on how income continuity risk is evaluated when a borrower’s work authorization status creates documented uncertainty about ongoing income. The policy should describe the specific underwriting factors considered — it shouldn’t say “we don’t lend to undocumented immigrants” (which creates fair lending exposure) or say nothing (which suggests the risk isn’t being managed).

Allowance qualitative adjustment. Work with your finance team to evaluate whether a qualitative factor for non-work-authorized borrower risk is appropriate under your CECL methodology. If the segment performs differently than your modeled expectations, or if the regulatory environment has changed in a way that creates incremental risk, a qualitative adjustment is defensible and well-supported by the interagency guidance.

Fair lending monitoring. Run the analysis on your lending outcomes: are your non-work-authorized borrower decisions consistent with your stated credit policy? Are there approval rate, pricing, or loan size differences between similarly-situated borrowers that aren’t explained by legitimate credit factors? If the answer involves anything that correlates with national origin, you need to know before an examiner does.

Documentation trail. Document the credit basis for decisions in this segment more thoroughly than you would for a standard loan. If the credit decision incorporates income continuity risk associated with work authorization status, that reasoning should be in the file — explicitly connecting the specific credit factor (income risk) to the specific credit decision (amount, terms, conditions), not just noting the borrower’s status.

So What?

The July 13 guidance is a credit risk management directive dressed in the language of a reminder. For institutions that lend to non-work-authorized borrowers and haven’t explicitly built this population into their credit risk framework — credit policy, allowance methodology, classification logic, fair lending monitoring — the guidance is telling you that gap will be visible at your next examination.

The path forward is specific: define the population, measure the exposure, assess whether performance differs from your general portfolio, build the qualitative allowance factor if warranted, update the credit policy, and document the fair lending analysis showing that your treatment of this group is based on specific credit risk factors consistently applied.

The compliance risk here is real in both directions. Treating this population with elevated scrutiny in a way that isn’t tied to specific, documented credit factors creates ECOA and national-origin discrimination exposure. Treating this population the same as your general portfolio without assessing whether specific credit risk factors apply creates safety and soundness exposure. The guidance is asking you to do the work that threads that needle — which means getting specific about the credit factors that are actually relevant to repayment for this group.

Related reading: CFPB Reg B Disparate Impact Removal: How State Fair Lending Laws Fill the Gap in 2026 · Credit Risk KRIs for Fintech Lenders: DPD, Charge-Off, and Concentration Metrics · OCC Bulletin 2026-29: Lending and Loan Portfolio Risk Management Examination Expectations