I. INTRODUCTION
Foreign nationals are citizens of another country who have a valid visa to live in or visit the United States, but who are not: (1) non-permanent resident aliens; (2) permanent resident aliens; or (3) U.S. citizens. Typically, foreign nationals do not have “green cards” and are not allowed to work in the United States. Foreign national documentation may include one or more of the following:
Non-permanent resident aliens are citizens of another country who reside in the United States under a Conditional Resident Alien Card, Temporary Resident Card, work visa, student visa or other permit for a specified period.
II. QUESTIONS AND ANSWERS
1. Can a Financial Institution Contract with an Alien?
Yes, but the financial institution should consider if there are any risks regarding the enforcement of the contract. For example, although an action to enforce a loan made to a nonresident alien may be filed in federal District Court, even with a judgment against the debtor, if he or she has left the United States, the bank may have the additional expense of enforcing the judgment or repossessing the collateral in a foreign jurisdiction.
2. Should the Bank be Concerned About Diplomatic Immunity?
Individuals that possess diplomatic immunity are not subject to civil process. Therefore, they may not be sued unless their home state permits it or the individual’s government waives immunity. Three exceptions to immunity in civil cases are prescribed by the Vienna Convention: (1) actions related to professional or commercial activity outside official functions; (2) actions as the executor or heir of an estate; and (3) “a real action” relating to private immovable property (intended for disputes over ownership or possession of property).
3. What Loans May be Made to Resident or Nonresident Aliens and Foreign Nationals?
There is no restriction in the law so long as the loan is for a legal purpose; however most lenders will make a distinction between U.S. citizens and permanent resident aliens versus non-permanent resident aliens, nonresident aliens and foreign nationals. Although some mortgage bankers follow investor and Fannie Mae guidelines and may lend to non-permanent resident aliens, nonresident aliens and foreign nationals, most financial institutions will not make other types of loans unless the borrower is a U.S. citizen or a permanent resident alien.
4. What Documentation Should be Obtained from a Permanent Resident Alien?
A financial institution should obtain an original of one of the following described documents:
5. Are There Any Regulatory Issues to Consider When Considering Loan Applications of Non-U.S. Citizens?
A lender may inquire about or base a credit decision on an applicant’s immigration status. Regulation B, § 202.5(d) (5) allows a creditor to ask about an applicant’s permanent residence and immigration status. In addition, § 202.6(b)(7) states that a creditor may consider whether an applicant is a permanent resident of the United States, the applicant’s immigration status and any additional information that is necessary to assess the creditor’s rights and remedies regarding repayment. Note however that Regulation B commentary language warns that a lender may not arbitrarily deny credit to some aliens and not others, merely on the grounds that the ones denied are not citizens. Although the practice of denying credit to all noncitizens may not be prohibited under Regulation B, it is probably illegal under other federal laws, particularly the Civil Rights Act of 1870, 42 U.S.C. 1981.
Some financial institutions will lend to a non-resident alien only if there is a co-signer who is either a U.S. Citizen or a permanent resident alien. Regulation B does not prohibit this loan underwriting criteria since the lender is ensuring that its collateral is protected should the nonresident alien exit the United States.
Since INS documentation continues to change in form or format, it may be advisable that a lender consult with an immigration attorney to verify the current status of an alien applicant.
Some lenders may limit, by loan policy, credit risk by permitting only residential-secured loans to nonresident aliens and foreign nationals and by prohibiting unsecured loans, unless the applicant is a United States citizen, a permanent resident alien or obtains an acceptable cosigner.
6. Should There be Any Concerns About OFAC?
Provisions of the U.S.A. Patriot Act require a financial institution to check the OFAC list for all transactions, including loan applicants, who fall into the categories of nonresident aliens and foreign nationals.
7. Should There be Any Concerns with the IRS?
Yes. IRS regulations determine whether or not income tax must be withheld from payments, including payments to third parties on an aliens and require that all payees receiving compensatory payments must obtain a tax identification number (TIN).
ATTACHMENT A
DOCUMENTS
Passports
Passports (in front or back) have identification pages that contain:
(2) holder’s signature;
(3) country of issue;
(4) holder’s permanent address at time of issuance;
(5) date of issuance; and
(6) date of expiration.
NOTE: Some passports have all this information on the same page as the holder’s picture.
Visa
A Visa is issued by a United States consulate or embassy that grants permission for entry into the United States. It contains a photograph of the holder and is generally permanently attached in the holder’s passport. Some visas will allow the holder to work in the United States under INS specified conditions while other visas are for tourism purposes only and do not allow the holder to work. Although a visa permits entry into the United States, the Form I-94 Arrival/Departure Record documents immigration status.
I-94 Arrival/Departure Record
This is a two-part document that is completed by an individual with a visa at the port of entry for INS processing. The INS retains the Arrival Record portion of the document, completes the Departure Record portion with arrival date, visa type and expiration date (noted on form as “Admitted until ______”). The Departure Record may be attached to the passport or remain loose. When the individual leaves the United States, the INS retains the Departure Record. For documentation purposes, Form I-94 should be photocopied when the individual is in the United States.
I-94W Visa Waiver Arrival/Departure Record
Similar to the Form I-94 except that, since the individual does not have a visa, he or she discloses and certifies certain information to INS. (See “Visa Waiver Program” in Definitions and Clarifications.)
Form IAP-66, Certificate of Eligibility for Exchange Visitor (J-1) Status
This is a United States Information Agency form allowing an individual to apply for a J-1 visa at a United States consulate or embassy.
ATTACHMENT B
DEFINITIONS
Port of entry: Location where individual enters the United States and processed by INS.
Sponsorship: Visa classes that are or may be “work authorized” involve formal institutional sponsorship for INS purposes. Documents authorizing an individual to apply for a visa, establish the basis on which that individual may receive payment from sources within the United States.
Canadian Citizens: Although not required to obtain either a visa or visa waiver to enter the United States, Canadians citizens who enter the United States without establishing any other status are presumed to be in the country for pleasure and are considered to be on B-2 status. Submission of Form IAP-66 confers J-1 status on a Canadian at the port of entry. Alternatively, Canadians may also apply for B-1 status at their port of entry. Immigration status will be indicated on the Form I-94 Arrival/Departure Record if the form has been obtained.
Visa Waiver Program: Visitors from the following listed countries may enter the United States for business or pleasure purposes for up to 90 days without a visa:
Andorra, Argentina, Australia, Austria, Belgium, Brunei, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Japan, Liechtenstein, Luxembourg, Monaco, The Netherlands, New Zealand, Norway, San Marino, Spain, Sweden, Switzerland, and the United Kingdom.
Persons on visa waiver may not accept unauthorized employment or attend school and may not change their status while in the country.
ATTACHMENT C
TABLE OF RELEVANT NONIMMIGRANT VISACLASSES
NUMBER
CLASSIFICATION
B-1
Visitor for business. No work authorization.
B-2
Visitor for pleasure. No work authorization.
B-1/B-2
Status determined by I-94. No work authorization.
BBBCC Border crossing card equivalent to B-1/B-2 visa.
Status determined by I-94. No work Authorization.
Mexican citizens entitled to multiple entries.
F-1
Student Work authorized under limited circumstances.
H-1B
Student enrolled in degree-granting program.
J-1
Exchange visitor. Work authorized under certain circumstances.
Visiting scholar, teacher or researcher.
Exchange student, not enrolled in degree-granting program.
O-1
Individual of extraordinary ability in sciences, arts, education, business or athletics. Work authorized for sponsoring organization.
P-1A
Internationally recognized athlete or athletic team. Work authorized for sponsoring organization.
P-1B
Internationally recognized entertainment group. Work authorized for sponsoring organization.
P-2
Artists or entertainers under reciprocal exchange program. Work authorized for sponsoring organization.
P-3
Culturally unique artists or entertainers. Work authorized for sponsoring organization.
WB
Waiver for business. No work authorization.
WT
Waiver for tourism. No work authorization.