facts | for Consumers |
Federal Trade Commission - December 1994
Mortgage Discrimination
fast facts
|
Bureau of Consumer Protection Office
of Consumer & Business Education (202) 326-3650 |
When you apply for a
mortgage (whether to purchase, refinance, or for home improvement
purposes), two important federal laws protect you from being
discriminated against. These are the Equal Credit Opportunity Act
(ECOA) and the Fair Housing Act (FHA).
These two laws cover some of the same practices, but have
important differences. For example, although you can't be
rejected for a mortgage because of your race or ethnic background
under either law, the ECOA specifically protects you against
discrimination because of your age while the FHA also protects
you if you have a handicap.
The ECOA prohibits discrimination in any aspect
of a credit transaction based on:
* Race or color.
* Religion.
* National origin.
* Sex.
* Marital status.
* Age (provided the applicant has the capacity to contract).
* The applicant's receipt of income derived from any public
assistance program.
* The applicant's exercise, in good faith, of any right under the
Consumer Credit Protection Act, the umbrella 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.
* Selling or renting a dwelling.
The FHA prohibits discrimination 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).
* Handicap.
Because both the ECOA and the FHA apply to mortgage lending,
lenders may not discriminate in mortgage lending based on any of
the prohibited factors in either list. For example, mortgage
lenders:
* Cannot discourage you from applying or deny you a mortgage
because of your race, national origin, religion, sex, marital
status, age, or because you receive public assistance income.
* Cannot consider your race, national origin, religion, 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.
* Cannot impose different terms or conditions (such as a higher
interest rate or larger downpayment) on a loan for reasons
relating to the applicant's race or sex or other prohibited
factors.
* Cannot consider the race of the people who live in the
neighborhood where you want to buy a house.
* Cannot, when appraising property, consider the race of people
living in the neighborhood where the property is located.
* Cannot ask about your plans for having or raising children,
(but may ask about dependent related expenses).
* Cannot refuse to purchase a loan or set different terms or
conditions for purchasing a loan based on discriminatory factors.
* Must consider reliable public assistance income in the same way
as other income.
* Must consider reliable income from part-time employment, Social
Security, pensions, and annuities.
* Must consider reliable alimony, child support, or separate
maintenance payments, if you choose to disclose this information.
A lender may ask you for proof that this income is received
consistently.
* Cannot require you to have a co-signer for the loan, if you
alone meet the lender's standards.
* Must accept as a co-signer, if one is needed, someone other
than your spouse, if you so choose. (If you own the property with
your spouse, he or she may be asked to sign documents permitting
you to mortgage the property.)
Not everyone who applies for a mortgage will
get one. Lenders can use factors such as income, expenses, debts,
and credit history to judge applicants.
But there are steps you can take to ensure that your application
gets full consideration. Make sure to show the lender all
information that supports your application.
For example, stable employment is important to many lenders.
Perhaps you've changed jobs recently, but have been employed
steadily in the same field for several years. If so, provide that
information on your application.
Obtain a copy of your credit report before you apply for a
mortgage. Sometimes the credit report is inaccurate. For example,
accounts might be reported that do not belong to you or paid
accounts might be reported as unpaid. If you find errors, dispute
this with the credit bureau and tell the lender of the dispute.
Sometimes past problems paying bills on time were caused by
unique circumstances, such as loss of a job or unusually high
medical expenses, and do not indicate a pattern that will
continue in the future. If that is the case, write a letter to
the lender explaining what caused your past credit problems.
Lenders must consider this information at your request.
Some mortgage lenders may attempt to charge
more to some borrowers than to others for the same loan product
offered at the same time. This may take the form of higher
interest rates or origination fees or more points. You may want
to ask the lender if the rate being quoted to you is the lowest
offered that day. The loan officer is probably basing the loan
offer on the list of mortgage rates issued frequently by that
company to its loan officers. Ask to see this list. If the lender
will not show you this, and you suspect you are not being offered
the lowest rates or points available, you may want to negotiate
for better terms or shop for another lender.
If your mortgage application is rejected, the
lender either must give you specific reasons why or tell you of
your right to ask for them. Under the law, you have the right to:
* Know within 30 days of the date of your completed application
whether your mortgage loan is approved. 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 generally must tell you so in writing.
* Know 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. (A
specific reason might be: "your income was too low" or
"you haven't been employed long enough." You are
entitled to more than vague reasons like "you didn't meet
our minimum standards.")
* Learn the specific reason why you were offered less favorable
terms than you applied for -- if you reject these less favorable
terms. (For example, the lender offered you a smaller mortgage or
a higher interest rate.)
* Find out what is in 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 and address of the credit bureau. You can get a free
copy of that report from the credit bureau if you request it
within 30 days. (Otherwise, the credit bureau can charge a
reasonable fee.) If you find incorrect information in the report,
know that the credit bureau is required to investigate items that
you dispute. If you still dispute the credit bureau's account
after its investigation, you also can include your summary of the
problem in the credit report.
* Obtain a copy of the property appraisal report from the lender,
if the appraisal was done in connection with your mortgage
application. (The lender may charge for this if you have not
already paid for the appraisal.) Mortgage applications may be
turned down because of poor appraisals. Review the appraisal to
see if the information it contains is accurate and whether the
appraiser considered illegal factors, such as the racial
composition of the neighborhood.
If you feel that the lender has not treated
your mortgage application fairly because of your race, national
origin, religion, sex, marital status, age, family status,
handicap, or because you receive public assistance income, you
can take several steps.
* 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.
* 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 consulting with an attorney about the possibility of
bringing a case in Federal district court under the ECOA or FHA.
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 lawyer's fees and court
costs. You also might consider joining with others to file a
class action suit.
A number of federal agencies share responsibility for the
enforcement of these Acts. Determining the appropriate agency to
contact depends, in part, on the type of financial institution
you dealt with.
For violations of the ECOA involving mortgage companies
and consumer finance companies:
Federal Trade Commission
Correspondence Branch
Washington, DC 20580
While the FTC does not resolve individual complaints, the agency
does use consumer comments to decide which companies to
investigate.
For violations of the Fair Housing Act, contact:
Office of Fair Housing and Equal Opportunity
U.S. 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)
You have one year to file a complaint with HUD, but you should
file as soon as possible. Your complaint to HUD should include:
* Your name and address.
* The name and address of the person or company who is the
subject of the complaint.
* The address or other identification of the housing involved.
* A short description of the facts that caused you to believe
your rights were violated.
* The dates of the alleged violation.
HUD will notify you when it receives your complaint. Normally,
HUD also will:
* Notify the alleged violator of your complaint and permit the
person to submit an answer.
* Investigate your complaint and determine whether there is a
reasonable cause to believe the Fair Housing Act has been
violated.
* Notify you if it cannot complete an investigation within 100
days of receiving your complaint.
For violations of the FHA or ECOA, contact: For
nationally-charted banks:
Comptroller of the Currency
Compliance Management
Mail Stop 7-5
Washington, DC 20219
For state-chartered banks insured by the Federal Deposit
Insurance Corporation, but not members of the Federal Reserve
System:
Federal Deposit Insurance Corporation
Consumer Affairs Division
Washington, DC 20429
For federally-chartered or federally-insured savings and
loans:
Office of Thrift Supervision
Consumer Affairs Program
Washington, DC 20552
For federally-chartered credit unions:
National Credit Union Administration
Consumer Affairs Division
Washington, DC 20456
For state member banks of the Federal Reserve System:
Consumer and Community Affairs
Board of Governors of the Federal Reserve System
20th & C Streets, NW
Washington, DC 20551
For discrimination complaints against all kinds of
creditors:
Department of Justice
Civil Rights Division
Washington, DC 20530
If you have questions about the Equal Credit
Opportunity Act or your credit rights, write: Correspondence
Branch, Federal Trade Commission, Washington, DC 20580.
You also may find useful such FTC brochures as Equal Credit
Opportunity, Fair Credit Reporting, Women and Credit Histories,
Credit and Divorce, and Best Sellers (a list of more than 140 FTC
consumer and business publications). For single free copies,
write: Public Reference, Federal Trade Commission, Washington, DC
20580 or call: (202) 326-2222. TDD: (202) 326-2502.
FTC Headquarters 6th & Pennsylvania Avenue, N.W. Washington, D.C. 20580 (202) 326-2222 TDD (202) 326-2502 FTC Regional Offices 1718 Peachtree Street, N.W., Suite 1000 Atlanta, Georgia 30367 (404) 347-4836 10 Causeway Street, Suite 1184 Boston, Massachusetts 02222-1073 (617) 565-7240 55 East Monroe Street, Suite 1437 Chicago, Illinois 60603 (312) 353-4423 668 Euclid Avenue, Suite 520-A Cleveland, Ohio 44114 (216) 522-4207 100 N. Central Expressway, Suite 500 Dallas, Texas 75201 (214) 767-5501 1405 Curtis Street, Suite 2900 Denver, Colorado 80202-2393 (303) 844-2271 11000 Wilshire Boulevard, Suite 13209 Los Angeles, California 90024 (310) 575-7575 150 William Street, Suite 1300 New York, New York 10038 (212) 264-1207 901 Market Street, Suite 570 San Francisco, California 94103 (415) 744-7920 2806 Federal Bldg., 915 Second Ave Seattle, Washington 98174 (206) 220-6363 |