Your Fair Credit Rights
We’ve all heard that many things in life are not fair. But the process of qualifying for a mortgage shouldn’t be one of them. That doesn’t mean you necessarily get the loan you apply for. It does mean that you have the right to be judged on your financial stability and credit history rather than on biases. Two federal laws, theEqual Credit Opportunity Act and the Fair Housing Act, prohibit lenders from considering irrelevant information, such as race or gender. And, these laws provide recourse if you suspect lenders have run afoul of the law in rejecting your application. If the Department of Justice suspects housing discrimination, an investigation may be filed under either or both of these laws. The Equal Credit Opportunity Act (ECOA) was originally signed into law in 1974. It prohibits discrimination in any credit transaction, including mortgages, based on:
- race or color
- national origin
- marital status
- age (provided the applicant is legally able to form a contract)
- income from public assistance programs
- the applicant’s good faith exercise of any right granted under the Consumer Credit Protection Act, which is the umbrella statute that includes the ECOA.
The Fair Housing Act (FHA) was initially passed in 1968. It is also called Title VIII of the Civil Rights Act, and makes it unlawful to discriminate in residential real estate transactions, including buying, selling, improving, or renting a housing unit. This law prohibits discrimination on bases similar to the ECOA. When the FHA was first signed into law it was specifically to prevent unfair practices based on race or skin color. Although the law also covers other bases for discrimination, nearly four decades after its passage, the majority of FHA violations reported to the Department of Fair Housing still involve race and color.
Municipalities have also been charged with violating the FHA by rejecting building permits or by passing zoning regulations, which result in physical separation of residents by race, color. The FHA also bars direct discrimination based on religion, as well as indirect discrimination such as zoning ordinances designed to prevent the use of private homes as places of worship. In today’s housing market, a rising number of single women are homeowners. Not too many years ago, it was hard for women to get mortgages alone because lenders saw them as financially risky. But the Fair Housing Act makes it unlawful to base a decision not to sell housing because of an applicant’s gender.
Discrimination based on an individual’s country of birth, or the country of birth of his ancestors, is also prohibited by the FHA. The Justice Department has taken action against some municipalities which have set up more stringent standards for certain groups to buy or build houses, as a covert way to limit the growth of those populations.
Having children under the age of 18 is not a lawful premise for refusing to approve a mortgage, according to the FHA. However, certain housing facilities may be designated as restricted to those ages 55 and over, under the Housing for Older Persons Act, an amendment to the FHA.
Discrimination based on disability is illegal in all types of housing transactions. This includes physical and mental disabilities, as well as a growing list of specific conditions. For example, according to the U.S. Department of Justice, disability may include conditions such as blindness, hearing impairment, mobility impairment, HIV infection, mental retardation, alcoholism, drug addiction, chronic fatigue, learning disability, head injury, and mental illness. However, the Justice Department adds that “current users of illegal controlled substances, persons convicted for illegal manufacture or distribution of a controlled substance, sex offenders, and juvenile offenders are not considered disabled under the Fair Housing Act, by virtue of that status.” The FHA prevents the use of zoning laws to hinder the residential choices of the disabled. It also demands that new multi-family construction meet the accessibility requirements within the law.
If your income includes public Social Security, pensions, annuities, child support, payments under a separate maintenance agreement, reliable alimony, or public assistance, a lender cannot refuse to include those items in your income calculations. In the case of alimony, lenders do have the right to ask you to prove that the payments are consistent. Lenders can’t require that a co-signor be your spouse. They also cannot require a co-signor if you otherwise meet the standards.
Lenders cannot discourage you from applying for a mortgage or reject your application on any of the bases prohibited by the Equal Credit Opportunity Act. They can however, determine your immigration status and your right to remain in the country long enough to repay the debt.
Lenders also cannot refuse a mortgage because of the racial makeup of the neighborhood an applicant wishes to live in. It is unlawful to ask about plans to have children or expand a family. However, lenders do have the right to ask about expenses relating to current dependents.
Your Century 21 Hometown Realty agent can answer any questions that you may have about your fair rights in applying for a mortgage. Additionally, loan officers at Prime Lending are available to help you with your application.