Overview of Mortgage Discrimination

Mortgage discrimination occurs when a lender does not offer the same home loan products to certain populations that they would offer to another population. Federal law and policy has established what is considered mortgage discrimination, how to report discrimination and guidance on how lenders can create fair lending practices when extending loans to applicants.

Equal Credit Opportunity Act

The Equal Credit Opportunity Act (ECOA) establishes the fair treatment of consumers applying for credit, which includes mortgage loans. The ECOA prohibits lending decisions based on

 • Color
 • Religion
 • National origin
 • Sex
 • Marital status
 • Age
 • Receiving income from public assistance
 • The applicant's having exercised any right under the Consumer Credit Protection Act

This means a lender cannot apply a higher interest rate or fees on your loan based on one of these factors. Once you have submitted your application, you have the right to know if it was accepted or denied within 30 days. If denied, you have the right to know why within 60 days. If you feel you have been discriminated against, the lender must give you the contact information to the appropriate government agency to report the violation.

Fair Housing Act

Also known as the Civil Rights Act of 1968, this law is more specific to mortgage lending and the discrimination that may arise in real estate-related transactions. The Fair Housing (FH) Act prohibits mortgage discrimination

 • in the selling and financing of residential real estate,
 • in the purchasing of real estate loans,
 • in the appraisal of residential real estate and
 • for loans to build or repair real estate.

Lending decisions based on race, color, national origin, religion, sex, familial status and disability are considered discriminatory. Discrimination includes refusing to provide information on a loan and advertisements that indicate lending preferences based on any of the above. Under the FH Act, you can also report violations of your rights to the Department of Housing and Urban Development (HUD). One of their local offices will ask you to provide a description of the incident, when it happened and contact information for the alleged violator. HUD will notify the violator and provide conciliation and/or an administrative hearing. Depending on the circumstances, your case may be referred to another agency.

FDIC April 29, 2004, Policy Statement on Discrimination in Lending

Lending discrimination has still persisted, even since the enactment of the FH Act and the ECOA. The Federal Deposit Insurance Corporation (FDIC), on behalf of a collective of government agencies, issued its Policy Statement on Discrimination in Lending.  Based on the findings of a study on lending discrimination, Congressional hearings and agency investigations, the FDIC policy statement was issued to provide further guidance to lenders on what government agencies considered to be discriminatory practices. The policy statement identified three forms of mortgage discrimination that lenders should be aware of:

 • Overt evidence of discrimination–Circumstances where a lender is blatantly discriminatory. Examples are making different credit offers to different age groups or expressing lending preferences for men.
 • Evidence of disparate treatment–Treatment of one loan applicant is different from another based on one applicant's membership in one of the protected classes. This can include making a minority wait longer than a non-minority to have his application processed.
 • Evidence of disparate impact–A policy or practice that a lender makes that causes a disproportionately negative impact on a protected class. An example would be setting a high loan amount for mortgage applicants. Certain groups that cannot afford a higher loan would be excluded.

The policy statement also includes a question-and-answer section to clarify gray areas or unanswered lender questions regarding potentially discriminatory practices.

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