Mortgage Discrimination

CHECKLISTS FOR MORTGAGE DISCRIMINATION

The Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA) protect you against discrimination when you apply for a mortgage to purchase, refinance, and/or make home improvements.

The ECOA prohibits discrimination in any aspect of a credit transaction due to the following characteristics:

--Race or color;

--Religion;

--National origin;

--Sex;

--Marital status;

--Age (provided the applicant is of age to enter into a contract);

--If the applicant's income is received from any public assistance program; and

--Applicant's use, in good faith, of any right under the Consumer Credit Protection Act, a general statute that includes ECOA.

The FHA prohibits discrimination in all aspects of residential real-estate related transactions, including:

--Making loans to buy, build, repair, or improve a dwelling;

--Selling, brokering, or appraising residential real estate; and

--Selling or renting a dwelling.

Discrimination is also prohibited based o­n:

Race or color;

National origin;

Religion;

Sex;

Familial status (defined as children under the age of 18 living with a parent or legal guardian, pregnant women, and people securing custody of children under 18); and

Handicap.

Lenders are required to:

--View consistent and steady public assistance income in the same way as other income.

--Consider reliable income from part-time employment, Social Security, pensions, and annuities.

--Consider reliable alimony, child support, or separate maintenance payments, if you choose to provide this information. A lender may ask you for documents to show that this income is received consistently.

--If a co-signer is needed, accept someone other than your spouse. If you own the property with your spouse, he or she may be asked to sign documents allowing you to mortgage the property.

Lenders are not allowed to:

--Discourage you from applying for a mortgage or reject your application because of your race, national origin, religion, sex, marital status, age, or because you receive public assistance income.

--Consider your race, national origin, or sex, although you will be asked to voluntarily disclose this information to help federal agencies enforce anti-discrimination laws. A creditor may consider your immigration status and whether you have the right to remain in the country long enough to repay the debt.

--Impose different terms or conditions, such as a higher interest rate or larger down payment, o­n a loan because of your race, sex, or other prohibited factors.

--Consider the racial make-up of the neighborhood where you want to live. This also applies when the property is being appraised.

--Inquire into your family-planning. Questions about expenses related to your dependents are permitted.

--Refuse to purchase a loan or set different terms or conditions for the loan purchase based o­n discriminatory factors.

--Insist o­n a co-signer if you fulfill the lender's standards.

Not everyone who applies for a mortgage will get o­ne. Lenders can use factors such as income, expenses, debts, and credit history to scan applicants.

There are steps you can take to ensure that your application gets full consideration. Give the lender all information that supports your application. The ability to consistently hold down a job, preferably with the same employer over a period of years is a plus.

Get a copy of your credit report before you apply for a mortgage. This way you can insure that your credit history is being accurately represented. If you've encountered difficulties in paying your bill in the past due to a lost job or high medical expenses inform the potential lender in writing as why this happened. Lenders must consider this information at your request.

Some mortgage lenders may try to charge some borrowers more than others for the same loan product offered at the same time. This may include higher interest rates or origination fees or more points. Ask the lender if the rate you're being quoted is the lowest offered that day. The lender is probably basing the loan offer o­n the list of mortgage rates frequently issued by that institution to its loan officers. If you decide to accept terms that are not the lowest available, ask the lender why you did not qualify for better terms. The answer may help you to correct errors and improve your creditworthiness.

If your mortgage is denied, the lender must give you specific reasons why or tell you of your right to ask for them. Under the law, you have the right to:

Find out within 30 days of the date of your completed application whether your mortgage loan is approved or not. The lender must make a reasonable effort to obtain all necessary information, such as credit reports and property appraisals. If your application is rejected, the lender must tell you in writing.

Be told specifically why your application was rejected. The lender must tell you the specific reason for the rejection or your right to learn the reason if you ask within 60 days. An acceptable reason may be: "your income was too low" or "you haven't been employed long enough." An unacceptable reason is "you didn't meet our minimum standards" which is not specific enough.

Learn the specific reason why you were offered less favorable terms than you applied for, but o­nly if you reject these terms. If the lender offered you a smaller mortgage or a higher interest rate, you have the right to know why if you did not accept these terms.

Review your credit report. The lender may have rejected your application because of negative information in your credit report. If so, the lender must tell you this and give you the name, address, and phone number of the credit bureau. You can get a free copy of that report from the credit bureau if you request it within 60 days. Otherwise, the credit bureau can charge up to $9.

If your report contains inaccurate information, the credit bureau is required to investigate items that you dispute. Those companies furnishing incorrect information to the credit bureaus also must reinvestigate items that you dispute. If you still dispute the credit bureau's account after a reinvestigation, you can add your summary of the problem in your credit report.

Get a copy of the property appraisal from the lender. Mortgage applications may be turned down because of poor appraisals. Check the appraisal. Check that it contains accurate information and determine whether the appraiser considered illegal factors, such as the racial make-up of the neighborhood.

If You Believe Discrimination is Involved
Complain to the lender. Sometimes you can persuade the lender to reconsider your application. Check with your state Attorney General's office to see if the creditor violated state laws. Many states have their own equal credit opportunity laws.

•  Contact a local private fair housing group and report violations to the appropriate government agency. If your mortgage application is denied, the lender must give you the name and address of the agency to contact.

•  Consider suing the lender in federal district court. If you win, you can recover your actual damages and be awarded punitive damages if the court finds that the lender's conduct was willful. You also may recover reasonable lawyers' fees and court costs. You also might consider joining with others to file a class action suit.

A number of federal agencies are responsible for enforcing the rights provided under the ECOA and the FHA. Deciding which agency to contact depends, in part, o­n the type of financial institution you dealt with.

For ECOA violations involving mortgage and consumer finance companies:

Federal Trade Commission
Consumer Response Center
Washington, DC 20580
202-326-2222; TDD: 1-866-653-4261

While the FTC generally does not intervene in individual disputes, the information you provide may indicate a cycle of violations requiring action by the Commission.

The Center also can provide you with a copy of Best Sellers , a complete list of FTC consumer and business publications. Or, visit us at ftc.gov on the World Wide Web.

For violations of the FHA:

Office of Fair Housing and Equal Opportunity
US Department of Housing and Urban
Development (HUD), Room 5204
Washington, DC 20410-2000
Toll-free hotline: 1-800-424-8590; TDD: 1-800-543-8294