Compliance is the key to successful ITIN lending

Financial services is one of the country’s most regulated industries. Because of regulatory scrutiny, it can be challenging for credit unions to reach beyond standard practices when creating new products and services or altering existing processes to meet changing consumer needs.  

Such is the case with loans granted using immigrant borrowers’ Individual Taxpayer Identification Numbers, or ITINs. ITINs can be issued to individuals who are ineligible to obtain a social security number, but who need to pay taxes on earnings. The immigrant population in the U.S. is a growing and vibrant segment, and they need access to the same financial products and services as non-immigrants, however, some have lacked options due to the hesitancy of financial institutions to create new processes, such as lending to immigrants with ITINs.

The secret to ITIN lending success is understanding the market and knowing the compliance requirements to successfully grant those loans. In addition to a new source of loan income, ITIN loans can help credit unions fulfill their mission of serving the underserved.

PolicyWorks, in cooperation with its sister company Coopera, the Filene Research Institute and Inclusiv (formerly the National Federation of Community Development Credit Unions) in October released the Implementation Guide: Individual Taxpayer Identification Number (ITIN) Lending. The 67-page publication, free to credit unions, offers guidance on ITIN lending for institutions entering the ITIN arena.

Like other aspects of business, credit unions can’t afford to ignore the compliance side of ITIN lending. Regulators pay special attention to growth in lending programs and expect institutions to follow comprehensive guidelines to manage compliance and operational risk, including strict adherence to Bank Secrecy Act parameters.

In addition to BSA compliance, any credit union’s risk analysis program should consider how ITIN loans will be underwritten and what type of documentation and borrower history will be acceptable in such cases. Safety and soundness considerations are paramount, which may also help the institution decide how to expand their existing loan programs to allow for ITIN lending.

Staff will need proper training to successfully implement loan procedures, especially in handling less familiar forms of documentation and identification. How staff members follow policies and procedures in their daily activities may receive special scrutiny during audit procedures.

Proper member identification can be especially challenging for lenders, and it’s critical to understand all different sources. In addition to SSNs and ITINs, NCUA allows Employer Identification Numbers, or EINs, for businesses. There also are other acceptable forms, many tied to the worker’s country of origin. Check with NCUA and any federal and state regulatory guidelines before proceeding with program development.

The ITIN lending guide covers all this information in greater detail, along with operational and marketing needs, helpful forms and questionnaires, and testimony from credit unions with successful ITIN lending programs already in place. The guide is a must-have for credit unions interested in serving this market.

Feel free to contact any of us at PolicyWorks and we will happily provide you with a complimentary copy of the guide.

Erin O'Hern

Erin O'Hern

As Vice President of Strategic Initiatives, Erin O'Hern supports ViClarity's partnerships and projects through her experience in the areas of governance, risk and compliance. Erin has more than a decade ... Web: Details