Thursday, December 2, 2021

Evaluating Credit History and Immigration Status

We are a small bank with one compliance manager: me. I have been tasked with setting policy for the rules involving the review of a mortgage loan applicant’s credit history. Also, I need to add a section to our guidelines for considering the immigration status of an applicant. 

What rules do we need to comply with involving an applicant's credit history? 

And, what rules should be followed for considering the immigration status in evaluating an applicant? 

Thanks for your question. It is a bit sparse in details, so I will provide a generic response. If you want to discuss it in more detail, you can contact me HERE

To your first question about the rules for consideration of credit history in the evaluation of an applicant, I set forth this caveat: my response is based on evaluating the creditworthiness of similarly qualified applicants for a similar type and amount of credit. 

A creditor may restrict the types of credit history and credit references that it will consider as long as the restrictions apply to all credit applicants without regard to sex, marital status, or any other prohibited basis. When an applicant requests, the creditor must consider credit information not reported through a credit bureau when the information relates to the same types of credit references and history that the creditor would consider if reported through a credit bureau. 

Using the Equal Credit Opportunity Act as a guide,[i] there are three specific rules in determining an applicant’s creditworthiness. 

The rules are:


(1) The credit history, when available, of accounts designated as accounts that the applicant and the applicant’s spouse are permitted to use or for which both are contractually liable;


(2) If an applicant so requests, any information the applicant may present that tends to indicate that the credit history being considered by the creditor does not accurately reflect the applicant’s creditworthiness; and,


(3) If the applicant so requests, the credit history, when available, of any account reported in the name of the applicant’s spouse or former spouse that the applicant can demonstrate accurately reflects the applicant’s creditworthiness.


With respect to the rules concerning the consideration of immigration status in the evaluation of an applicant, a creditor may consider the applicant’s immigration status or status as a permanent resident in the United States, and any additional information that may be necessary to ascertain the creditor’s rights and remedies regarding repayment.[ii] 

For example, in considering immigration status, a creditor may differentiate between a non-citizen who is a long-time resident with permanent resident status and a non-citizen who is temporarily in the United States on a student visa.[iii] 

It is not discriminatory based on national origin to deny credit on the ground that the applicant is not a U.S. citizen;[iv] however, if this scenario occurs, I strongly urge that you confer with a compliance professional for guidance. 

Jonathan Foxx, Ph.D., MBA
Chairman & Managing Director

Lenders Compliance Group
[i] 12 CFR § 202.6(b)(6)
[ii] Idem. § 202.6(b)(7)
[iii] 12 CFR Supplement I to part 202 – Official Staff Interpretations § 202.6(b)(7)-1
[iv] 12 CFR Supplement I to part 202 – Official Staff Interpretations § 202.6(b)(7)-2