Mortgage Discrimination Laws

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 What Is Mortgage Discrimination?

Mortgage discrimination cases arise when mortgage lenders discriminate against people applying for mortgage loans on the basis of race, ethnic origin, gender, age, disability or religion, Despite the fact that home ownership in the United States is at all-time highs, the outlook for certain groups of people is not as rosy.

Mortgage lending institutions still sometimes employ discriminatory practices towards various groups in obtaining home mortgage loans. For instance, studies show that minorities have a much more difficult time than whites in obtaining mortgage financing and, when successful, receive smaller loan amounts and less favorable terms and conditions.

What Rights and Protection Do I Have against Mortgage Discrimination?

There are federal laws that protect a person from discrimination when they apply for a mortgage. They are the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA). These laws give a person the right to be free from mortgage discrimination.

The FHA prohibits discrimination in residential real-estate transactions based on national origin, race, gender, religion, disability or family status. The FHA forbids discrimination in all aspects of transactions related to residential real-estate, including:

  • Making loans to buy a residence,
  • Making loans to build, repair, or improve a place to live;
  • Selling, brokering, or appraising residential real estate;
  • Selling a place to live;
  • Renting a place to live.

According to the FHA, lenders are required to do the following:

  • Consider reliable income from public assistance the same as other income;
  • Consider reliable income from part-time employment, Social Security, pensions, and annuities; these are often sources of income for elderly people;
  • Consider reliable alimony, child support, or separate maintenance payments, if a person chooses to provide this information. A lender can demand proof that a person receives this income consistently;
  • Accept someone other than a person’s spouse as a co-signer if a co-signer is needed. If a person owns the property with their spouse, the spouse can be asked to sign documents that permit a person to mortgage the property.

The FHA bans lenders from doing the following:

  • Discouraging a person from applying for a mortgage because of their race, color, religion, national origin, gender, marital status, or age, or because a person gets public assistance.
  • Rejecting a mortgage application because of a person’s race, color, religion, national origin, gender, marital status, or age, or because the person gets public assistance;
  • Considering a person’s gender, race, or national origin, although a person will be asked to disclose this information voluntarily to help federal agencies enforce anti-discrimination laws. However, a creditor may consider a person’s immigration status and whether a person has a right to remain in the country long enough to repay the debt;
  • Setting different terms or conditions on a loan — like a higher interest rate or larger down payment — based on a person’s gender, race, or other forbidden factors;
  • Discouraging a person from buying because of the racial make-up of the neighborhood where a person wants to live;
  • Asking about a person’s plans for having a family, although they can ask questions about expenses related to a person’s dependents;
  • Require a cosigner for a loan if a person meets the lender’s requirements.

The ECOA prohibits discrimination in credit transactions based on national origin, race, color, gender, age, religion, marital status, and incomes from public assistance programs. Under the ECOA, creditors may ask a person for most of this information in certain situations. However, they may not use the information as a reason to deny a person credit or to set the terms and conditions of any credit that is granted. They are never allowed to ask about a person’s religion.

Everyone who participates in decisions to extend credit or in setting the terms of that credit must comply with the ECOA. It applies to all credit transactions, not just mortgage lending. Real estate brokers who arrange financing for home purchases must comply with the law also.

What are Some Examples of Mortgage Discrimination?

Some examples of how mortgage lenders discriminate in dealing with mortgage loan applications are:

  • Denying a mortgage because the property is located in a majority-minority neighborhood;
  • Charging a higher interest rate on a mortgage because the property is located in a majority-minority neighborhood;
  • Providing a different customer service experience to mortgage applicants because of their race, color, religion, gender, familial status (e.g. a person is single), national origin or disability;
  • Refusing to consider a person’s disability-related income, such as SSI or SSDI;
  • 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

What Should I Do if I Have Been Discriminated Against?

A person’s credit report is going to be one of the main factors in determining whether they obtain a mortgage loan. So it is a good idea to get a free credit report before starting to apply for a mortgage. The three credit reporting agencies are Transunion, Experian, and Equifax. A person has a right to obtain their credit report free of charge. A person planning to apply for a mortgage should get their report before applying and work with the credit reporting agency to make it as strong as possible.

If a lender rejects a person’s mortgage application, it may be because there is negative information in the person’s credit report. If so, the lender has to tell a person that. The lender must also give the person the name, address, and phone number of the consumer reporting company that provided the information. So, if a person’s mortgage application has been denied, they should ask the lender if their credit report is the reason and what information in the report has led to the denial.

A person can get a free copy of that report from the consumer reporting company if they ask for it within 60 days of denial of a mortgage application. If a person’s credit report has inaccurate information, the consumer reporting company is required to investigate any items that a person disputes.

The companies that supply inaccurate information to the consumer reporting company also must reinvestigate the items a person disputes. If a person still disputes the consumer reporting company’s account, even after a reinvestigation, the person should make sure that their credit report includes their own summary of the problem.

If a person suspects that it is not their credit report or other financial factors that explain the denial of a mortgage application or other action, the person should:

  • Talk to the lender first; a person may be able to convince a lender to change their decision;
  • A person might complain to the office of the state attorney general in which the person lives; the creditor might have violated state anti-discrimination laws; many states have their own equal credit opportunity laws;
  • Speak with a local fair housing organization in the city or county where a person lives;
  • File a complaint online with the Office of Fair Housing and Equal Opportunity in the federal government’s Department of Housing and Urban Development; a complaint can also be filed in writing or by phone;

HUD may require the alleged violator to respond to the complaint and investigate the situation. HUD will either determine that they have found enough evidence of a fair housing violation or find that there is no cause for the complaint. If HUD finds no cause, the person can contest this by filing a mortgage discrimination complaint in federal court.

A person will want to consult an experienced real estate lawyer before undertaking a mortgage discrimination lawsuit in federal court. It might be wise to consult a lawyer about filing a claim under the ECOA or FHA as well.

Do I Need a Lawyer to Help Me with My Mortgage Discrimination Claim?

Pursing a mortgage discrimination claim against a mortgage lender is complicated and stressful. If you think you have been the victim of discrimination when you applied for a mortgage and have not been able to solve the problem with the lender, you may want to talk to an experienced mortgage lawyer.

An experienced lawyer can help you analyze the situation and can inform you of your options. A lawyer can prepare a complaint and make sure that any deadlines specific to your claim are not missed. A real estate lawyer can also help you investigate and pursue any legal remedies. These may include punitive damages, lawyer’s fees and court costs in addition to actual damages. You have your best chance for a positive outcome with an experienced lawyer at your side.

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