Trump Executive Order Targets Undocumented Borrowers – Compliance Clock Ticking
President Trump signed Executive Order 14406, “Restoring Integrity to America’s Financial System” (“EO”), on May 19, 2026. The EO addresses how mortgage lenders, banks and other financial institutions handle customers and borrowers who lack lawful immigration status or work authorization. Whatever one’s view of the underlying policy, the EO creates compliance questions that mortgage companies will need to work through.
What the EO Does
The EO operates on two tracks:
Track 1 – Anti-Money Laundering and Customer Due Diligence
The Secretary of the Treasury must issue guidance on the following timeline:
Within 60 days: Issue a formal Advisory to financial institutions describing red flags associated with payroll fraud, use of nominee accounts and shell companies, structuring transactions around Bank Secrecy Act (BSA) thresholds, and labor trafficking activity
Within 90 days: Propose updated BSA regulations strengthening customer due diligence requirements, including the ability to collect immigration status information where relevant to fraud or sanctions risk
Within 180 days: Consider further changes to Customer Identification Program rules, with specific attention to risks posed by foreign consular ID cards
The EO also flags ITIN use as a potential risk factor requiring enhanced due diligence. This is worth noting: ITINs are a legitimate tax-compliance tool, and Treasury’s forthcoming Advisory will determine how institutions are expected to treat them in practice.
Track 2 – Credit Risk and Ability to Repay
Within 60 days: The CFPB must consider clarifying that potential deportation and resulting loss of wages are factors lenders mayweigh in ability-to-repay determinations under Regulation Z
Within 60 days: Each federal banking regulator must issue guidance on managing credit risks associated with the non-work-authorized population
What It Means for Mortgage Lenders
The ability-to-repay piece is the most direct pressure point for mortgage companies. If the CFPB issues the guidance contemplated by the EO, lenders would have explicit regulatory cover to factor immigration status into underwriting. That creates legal tension that warrants attention now, regardless of where one stands on the policy:
Underwriting policies that use immigration status as a factor may raise Fair Housing Act and Equal Credit Opportunity Act concerns, depending on how they are designed and applied
Policies that have a disparate impact on national origin groups remain legally vulnerable regardless of framing
The EO itself does not amend the Fair Housing Act or ECOA; courts will continue to apply both statutes
Bottom Line
The full practical impact of EO 14406 depends on what implementing guidance actually says. The 60-day CFPB and banking regulator deadlines fall in mid-July. Mortgage companies should monitor those releases and, in the meantime, begin reviewing:
Underwriting policies and any criteria that could intersect with immigration status
ITIN programs generally
Third-party vendor and broker relationships in light of enhanced due diligence expectations
Fair lending risk frameworks to assess exposure under the FHA and ECOA as guidance evolves
Questions about this EO or related fair lending compliance? Contact troy@garrishorn.com.