Skills for your Success



NO DISCRIMINATION ALLOWED !  -  Federal Protections in the Marketplace

Two federal laws, the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA), offer protections against discrimination. The ECOA forbids credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or whether you receive income from a public assistance program. As a lender, you may ask for most of this information in certain situations, but you cannot use it as a reason to deny credit or to set the terms of credit. You are never allowed to ask about your client’s religion. Everyone who participates in the decision to grant credit or in setting the terms of that credit, including real estate brokers who arrange financing, must comply with the ECOA.


The FHA forbids discrimination in all aspects of residential real-estate related transactions, including: making loans to buy, build, repair, or improve a place to live; selling, brokering, or appraising residential real estate; and selling or renting a place to live

The FHA also forbids discrimination based on race, color, religion, sex, national origin, handicaps, or familial status. That’s defined as children under 18 living with a parent or legal guardian, pregnant women, and people securing custody of children under 18.


Fair Lending Laws and Regulations

The Equal Credit Opportunity Act (ECOA) prohibits discrimination in any aspect of a credit transaction. It applies to any extension of credit, including extensions of credit to small businesses, corporations, partnerships, and trusts.


The ECOA prohibits discrimination 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; or • The applicant’s exercise, in good faith, of any right under the Consumer Credit Protection Act.


The Fair Housing Act (FHAct) prohibits discrimination in all aspects of “residential real-estate related transactions,” including but not limited to:

  • Making loans to buy, build, repair, or improve a dwelling; • Purchasing real estate loans; • Selling, brokering, or appraising residential real estate; or • Selling or renting a dwelling.


The FHAct 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 custodian, pregnant women, and people securing custody of children under 18); or • Handicap.


The Department of Housing and Urban Development’s (HUD) regulations implementing the FHAct are found at 24 CFR Part 100. Because both the FHAct and the ECOA apply to mortgage lending, lenders may not discriminate in mortgage lending based on any of the prohibited factors in either list.


Under the ECOA, it is unlawful for a lender to discriminate on a prohibited basis in any aspect of a credit transaction, and under both the ECOA and the FHAct, it is unlawful for a lender to discriminate on a prohibited basis in a residential real-estate-related transaction. Under one or both of these laws, a lender may not, because of a prohibited factor:

  • Fail to provide information or services or provide different information or services regarding any aspect of the lending process, including credit availability, application procedures, or lending standards; • Discourage or selectively encourage applicants with respect to inquiries about or applications for credit; • Refuse to extend credit or use different standards in determining whether to extend credit; • Vary the terms of credit offered, including the amount, interest rate, duration, or type of loan; • Use different standards to evaluate collateral; • Treat a borrower differently in servicing a loan or invoking default remedies; • Use different standards for pooling or packaging a loan in the secondary market.


A lender may not express, orally or in writing, a preference based on prohibited factors or indicate that it will treat applicants differently on a prohibited basis. A violation may still exist even if a lender treated applicants equally.


A lender may not discriminate on a prohibited basis because of the characteristics of

  • An applicant, prospective applicant, or borrower; • A person associated with an applicant, prospective applicant, or borrower (for example, a co-applicant, spouse, business partner, or live-in aide); • The present or prospective occupants of either the property to be financed or the characteristics of the neighborhood or other area where property to be financed is located.


Finally, the FHAct requires lenders to make reasonable accommodations for a person with disabilities when such accommodations are necessary to afford the person an equal opportunity to apply for credit.


Ethics in the real estate industry

Ethics may seem like a complex issue, but it really boils down to a few simple points:

  • Treat everyone equally. • Be honest. • Give full disclosure. • Don’t take advantage of people. • Keep good documentation. If you do these things, follow the law, and adhere to a code of ethics put forth by your state or local mortgage board and other industry groups, then you shouldn’t have any problems.
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