Are You Facing Mortgage Discrimination?

It’s against the law to practice mortgage discrimination. Keep this in mind when applying for a mortgage whether for a new home, refinancing an existing property, or home improvements. 

If you’re actively seeking a mortgage, the Federal Trade Commission advises borrowers to fully research the mortgages market  and associated rates.

In addition, you should review the laws that protect borrowers against any form of discrimination.

Read on for a closer look at some relevant information that’ll help keep you protected.

Protections Against Discrimination

Mortgage buyers are protected against discrimination by two federal laws: the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA). The latter bans credit discrimination due to color, race, religion, marital status, age, national origin, and if a public assistance program is supplying you with income. Such information can be requested by lenders, but it can’t be used to deny you credit or affect terms. Any organization that supplies credit or is involved in the decision-making process must abide by the terms of the ECOA.

The FHA deals with forbidding discrimination in relation to transactions relating to residential real estate. This includes loans for the purpose of purchasing a property or to carry out home improvements. It also covers selling or renting a property, selling, appraising, or brokering residential real estate. Discrimination is forbidden on the basis of color, race, religion, sex, handicaps, national origin, and familial status.

Do’s And Don’ts

 When selling mortgages, lenders must do the following:

• Consider reliable income from those in part-time employment or those who have income from annuities, pensions, or Social Security
• Consider public assistance the same as any other type of income
• Consider child support, maintenance payments, or alimony payments, if such information is supplied by the borrower. If the income is reliable and consistent then it should be treated as a positive
• If a co-signer is required, then a lender must accept a non-spouse. A spouse who co-owns may be required to sign documents to allow the property to be mortgaged

Lenders must not do the following:

• Consider sex, race or national origin even though such information will be requested to help agencies fight discrimination. Immigration status may still be considered by a creditor if the right to remain in the country affects an ability to make full payments
• Use race, religion, sex, national origin, color, age, marital status or receiving public assistance to reject an application or discourage applicants
• Offer different terms to applicants based on sex, race, or other prohibited factors
• Discourage applications due to the racial make-up of the applicant’s neighborhood
• Ask about plans to have a family
• Demand a co-signer given that the applicant meets the loan requirements

Tips For Strengthening Your Application

To evaluate an application, lenders assess an applicant’s debts, income, expenses, and credit history. Those seeking a mortgage can increase their chances of avoiding rejection by taking the following simple steps.

• Obtain a copy of your credit report: A report contains personal and financial information that can help lenders, insurers, and employers better assess if you’re reliable or not. Everyone is entitled to a free annual credit report from one of the three main credit bureaus. 
• Ensure the report is correct and up to date: Reports can contain errors, so regularly check for accuracy. Mistakes may include listing other people’s accounts or wrongly reporting unpaid bills. Dispute mistakes with the credit agency and tell the lender
• Supply the lender with relevant information: Explaining certain details on your report may help your cause. For example, explain why you struggled with payments previously or why you had an employment change. Lenders must consider any information you provide

Always shop around to get the best rates. Assess all fees, not just the interest rate. Negotiating rates with a lender is also an acceptable option.

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What To Do In Case You're Discriminated Against

If you suspect discrimination, file a complaint and ask for the lender to reconsider your application. If requested, a lender must put in writing the reason for declining an application. You can also consider suing in a federal district court. If successful, you can claim the damages and recover costs. 

Government agencies should also be informed of any suspected violations. Ask your lender about the appropriate government agency to contact. The lender is obligated to supply the agency’s details. Depending on the violation, complaints can be filed with the Consumer Financial Protection Bureau or the Department of Housing and Urban Development. 

Bottom Line

Age, race, and color are just a few factors that can’t be used by a lender to reject a mortgage application. If you believe you have been discriminated against, first demand to see why you were rejected. If you’re not satisfied with the reasons, it’s time to make an official complaint.