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The Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA) protect you against mortgage discrimination when you apply for a home purchase, refinance, or make home improvements.
Mortgage Discrimination and Your Rights Under ECOA
The ECOA prohibits discrimination in any aspect of a credit transaction based on:
- race or color;
- national origin;
- marital status;
- age (provided the applicant has the capacity to contract);
- the applicant's receipt of income derived from any public assistance program; and
- the applicant's exercise, in good faith, of any right under the Consumer Credit Protection Act, the umbrella statute that includes ECOA.
Mortgage Discrimination and Your Rights Under FHA
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.
- It also prohibits discrimination based on:
- race or color;
- national origin;
- 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
Lender Do's and Don'ts
- consider reliable 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 proof 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.
- 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 based on your race, sex, or other prohibited factors.
- consider the racial composition of the neighborhood where you want to live. This also applies when the property is being appraised.
- ask about your plans for having a family. 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.
- require a co-signer if you meet the lender's standards.
If Your Application Is Rejected
If your mortgage is denied, the lender must give you specific reasons why or tell you of your right to ask for them. If you suspect mortgage discrimination, 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 must tell you 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. An acceptable response might be: "your income was too low" or "you haven't been employed long enough." A response of "you didn't meet our minimum standards" is not specific enough and may indicated mortgage discrimination.
Learn the specific reason why you were offered less favorable terms than you applied for, but only if you reject these terms. For example, 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 the lender's counter offer.
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, 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 $8.
If your report contains inaccurate information, the credit bureau is required to investigate items that you dispute. Those companies furnishing inaccurate 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 include 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. Review the appraisal. Check that it contains accurate information and determine whether the appraiser considered illegal factors, such as the racial composition of the neighborhood.
If You Suspect Discrimination
Take action if you think you've been discriminated against.
- 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.
If you have additional questions about mortgage discrimination, consider speaking with a real estate attorney.