Homeownership is one of the most momentous milestones in any person’s lifetime. More than just a purchase or even an investment, owning a home stands for security, pride, your hopes and dreams. No person should be barred from this process based solely on race, gender, religion or identity and discrimination in housing finance is against the law. If you’re looking to purchase, refinance, or renovate a home, it’s important that you familiarize yourself with the fair lending laws in place.
Federal fair lending laws
There are two major federal laws in place designed to protect home seekers from discrimination:
- The Equal Credit Opportunity Act (ECOA), prohibits mortgage professionals from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age or because an applicant receives income from a public assistance program.
- The Fair Housing Act (FHA), which protects people from discrimination when they are renting or buying a home, getting a mortgage, seeking housing assistance, or engaging in other housing-related activities. The Fair Housing Act prohibits discrimination in housing due to race, color, national origin, religion, sex, familial status or disability.
What is considered discrimination?
According to the U.S. Department of Housing and Urban Development, examples of lending discrimination, or FHA violations, may include:
- “Denying a mortgage or charging a higher interest rate because the property is located in a majority-minority neighborhood.
- Providing a different customer service experience to mortgage applicants depending on their race, color, religion, sex, familial status, national origin or disability.
- Refusing to consider a mortgage applicant’s disability-related income, such as Social Security Income or Social Security Disability Insurance.
- Steering a borrower to a loan with less favorable terms because of his or her race, color, religion, sex, familial status, national origin or disability.
- Targeting a minority community for fraudulent home loan modification assistance.
- Refusing to provide mortgages to women on maternity leave.”
Examples of ECOA violations, per the Federal Trade Commission, can include:
- “Imposing different terms or conditions, like a higher interest rate or higher fees, on a loan based on your race, color, religion, national origin, sex, marital status, age, or because you receive public assistance.
- Asking if you are widowed or divorced. A mortgage professional may use only the terms: married, unmarried, or separated.
- Considering the racial composition of the neighborhood where you want to buy, refinance or improve a house with money you are borrowing.
- Refusing to consider reliable public assistance income the same way as other income.”
Like most legal issues, housing finance discrimination is not always cut and dried. Many states have housing finance anti-discrimination laws that provide more expansive protections than federal law. If you suspect your fair lending rights have been violated, it is critical to take action.
Steps to take in case of suspected discrimination
- First, submit a formal complaint to your mortgage professional. Depending on the nature of the complaint, the mortgage professional may work to right the wrong.
- Contact an attorney of your choice or your local Attorney General’s office or your state housing finance authority regarding federal and state laws. State laws vary across the U.S. and a legal expert can offer more insight on potential violations and recourse.
- Consider taking appropriate legal action, as advised by a legal or regulatory professional.
- Report any suspected violations to the appropriate government agency. Complaints are accepted for both FHA and ECOA violations.
Lending discrimination is a serious offense and should be treated as such. If you believe you’ve been a victim of discrimination, take action now.
Published on January 20, 2020
