Bank regulators issue guidance on credit risk for unauthorized workers
The OCC, FDIC and NCUA reminded lenders to manage credit risk for borrowers without work authorization under existing rules.
The recent guidance from bank regulators on credit risk for unauthorized workers is a timely reminder for lenders to revisit their risk management practices, particularly in the construction industry where labor shortages often lead to complex workforce arrangements.
Construction companies frequently hire subcontractors or workers through staffing agencies, increasing the likelihood of inadvertently engaging workers without proper work authorization. Lenders must ensure that their borrowers, including those in the construction sector, have adequate controls in place to verify work authorization and manage potential credit risks.
As the construction industry continues to navigate labor shortages and supply chain disruptions, lenders should closely monitor their exposure to credit risk. To watch next: how lenders respond to this guidance and whether it leads to changes in their underwriting standards or loan terms for construction companies; and how regulators enforce these guidelines in practice, potentially impacting the availability of credit for construction projects.
Originally reported by housingwire.com. ConstructionNews adds analysis for real estate & property readers.