CFPB guidance points mortgage lenders to consider borrower immigration status

The Consumer Financial Protection Bureau (CFPB) said Friday that lenders may be required to consider a borrower’s immigration status when evaluating their ability to repay a mortgage or other credit product if that status could affect the borrower’s future income.

In a policy statement scheduled for publication in the Federal Register on June 8, the CFPB said existing federal lending laws may obligate creditors to consider information indicating that a consumer’s ability to earn income in the U.S. could change due to immigration-related circumstances.

Fox Business first reported the news.

Existing requirements under TILA

The guidance centers on existing requirements under the Truth in Lending Act (TILA), which require lenders to make a reasonable, good-faith determination that a borrower can repay a loan before extending certain types of credit.

“The Truth in Lending Act and its implementing Regulation Z require creditors to assess consumers’ ability to repay before offering mortgages and certain open-end credit products. This statement emphasizes to creditors that these requirements may obligate consideration of a consumer’s immigration status, especially where removal from the United States may disrupt the consumer’s income,” the document read.

The bureau said that when a lender has information suggesting a consumer’s immigration status could affect continued employment in the U.S., that information may be relevant to assessing future income and repayment ability.

“For example, a creditor may regard a credit applicant who is neither lawfully present nor permitted to work in the United States as being subject to removal,” the CFPB wrote, citing the Trump administration’s January 2025 executive order to enforce immigration laws against people who are unlawfully present in the country.

The CFPB noted that lenders already have the authority under the Equal Credit Opportunity Act (ECOA) to consider a borrower’s immigration status when evaluating repayment risk.

The agency said that if information available during the application process suggests a borrower’s income could change in the future due to immigration-related issues, lenders may need to factor that into their assessment of whether the borrower can afford the loan.

The bureau emphasized that the guidance “does not have the force or effect of law” and does not create new legal requirements. Instead, it is intended to clarify how existing lending regulations apply when a borrower’s immigration status may affect future earnings.

The policy statement marks the latest move by the CFPB under acting director Russell Vought, who is set to remain as its leader until Aug. 1.

According to a May 29 staff email obtained by Bloomberg Law, the CFPB is reportedly preparing for Vought’s departure. The outlet reported that Mark Paoletta, the CFPB’s chief legal officer, was named deputy director while retaining his role as the agency’s top lawyer and continuing as general counsel for the White House Office of Management and Budget (OMB).

Industry reactions

Industry groups and consumer advocates are expected to closely examine the guidance for its potential impact on mortgage lending and credit access for noncitizens.

“Credit decisions should be based on a borrower’s actual ability to repay, not hypotheticals based on the borrower’s immigration status,” Jesse Van Tol, president and CEO of the National Community Reinvestment Coalition (NCRC), said in a statement. “Access to credit expands opportunity for families, entrepreneurs and communities. Policies that encourage lenders to consider immigration status risk excluding qualified borrowers from the financial mainstream.

“The hypocrisy of discouraging lending to hard-working immigrants who pay taxes, while claiming that banks improperly ‘debanked’ some wealthy people based on their highly risky, often international, crypto transactions should be lost on no one,” Van Tol added. “Favoring one while denigrating the other makes clear that this policy is not about risk: it’s about picking winners and losers.”

Richard Horn, co-managing partner at Garris Horn and a former senior counsel and special adviser in the CFPB’s Office of Regulations, told HousingWire that he’s had clients experience higher levels of defaults and property abandonments due to deportations.

“Of course, this represents a huge change from the previous Democrat administrations that thought any inquiry about immigration status was discriminatory,” Horn said. “But in reality, this is common sense compliance if a consumer is potentially subject to deportation, because then that income could disappear. … It’s protecting investors from these very risky loans.”

Horn added that the risk for lenders is that the policy statement makes this an obligation in certain situations.

“This creates compliance risks, especially because, as the policy statement points out, immigration is a very complex and changing area,” he said. “Just take DACA for example — which is a mushy, amorphous status. I think lenders will need to talk to their counsel about how to implement this.”

Elena Babinecz, a partner at Baker Donelson and former manager of the CFPB’s ECOA rulemakings and guidance, pointed to language used by the bureau in its guidance.

The guidance reads: “Indications that an individual may not be lawfully present, and therefore may be at risk of removal, may come from various sources, including direct inquiry or the consumer’s reliance on atypical identification methods, such as an Individual Taxpayer Identification Number (ITIN), typically issued to taxpayers to individuals who lack proof of legal residency.”

“What they’re saying is, ‘Hey, this is a red flag for the CFPB. If you’re using a consumer’s ITIN as proof of their residency, you’re going to violate TILA,'” Babinecz said. “This statement is clearly a signal to industry that when a consumer’s ability to repay a loan or line of credit could change in the future on account of immigration status, then you’re under a legal obligation, in the view of the CFPB, to consider that information.”

Babinecz said that the guidance, while not an order that changes law, indicates that as the agency moves forward in its supervisory work and in potential enforcement matters, it will be extra vigilant about a borrower’s immigration status.

“They’re going to want documentation shown to them from the lender that you made sure that you verified, with appropriate information, whether this consumer is lawfully present or not,” she said.

For lenders, Babinecz says this is a sign to be alert about what the agency is evaluating. “I think what lenders are now going to be figuring out is, with our current practices, policies and procedures, are they good enough to comply with this new statement?”