Discrimination is unfortunately still a part of life for some people, and it can occasionally rear its ugly head when it comes to mortgage applications. Fortunately for borrowers, the Equal Credit Opportunity Act (ECOA) and Fair Housing Act (FHA) prohibit lenders from discriminating against a borrower on the basis of their race or color, religion, national origin, sex, marital status, or age (provided the applicant is old enough to contract). If you suspect you’ve been the victim of mortgage discrimination or want to avoid such a thing happening to you, then there are several things you can do to protect your rights.
Preparation Is Key
The best way to protect yourself against mortgage discrimination is to find out your credit score and understand what type of loans you’re eligible for – before applying. If you know you have a good credit score but a lender rejects your application or offers you bad terms and mortgage rates, you may have cause to suspect discrimination.
There are several ways you can check your credit score:
You can request a free credit report each year from each of the 3 major credit agencies – Equifax, Experian, and TransUnion.
Some non-profit credit counselors and government-approved housing counselors can provide you with a free credit report.
Many credit card companies provide credit scores to their customers. However, these aren’t as comprehensive as reports from the major credit agencies.
Once you know your score, there are a number of mortgage comparison or marketplace websites you can use to find out what type of loans and rates you’re eligible for. For example:
LendingTree is an online marketplace that offers several offers from multiple lenders. Borrowers can use it to choose a lender or to simply understand their loan options before going and speaking directly with a lender.
The Easy Loan Site is a free online service that enables borrowers to compare and calculate home loan and refinancing options. Users can compare between different types of mortgages and refis just by filling in a few basic details.
Dealing with a Bad Offer
As a general rule, you can always negotiate with your lender, and this is no different if you suspect discrimination is behind a bad offer. Today there is more competition than ever between lenders, and this is good news for borrowers. Almost everything about a loan is up for negotiation, including the APR, term, and closing costs. In fact, depending on a borrower’s credit score and overall financial health, many lenders are willing to waive some or all of a borrower’s closing costs. As always, the key is to shop around: you may find that one lender gives you a bad offer, but that others give you a better deal.
You’re Entitled to an Explanation
If a lender rejects your mortgage application, you are entitled to ask for the following:
A written explanation
A lender can take up to 30 days from the date of your completed application to let you know if your mortgage has been approved. If you are rejected, it must give you the reasons for its decision if you request this within 60 days of your rejection. The lender should give specific reasons, such as low income, low credit score, or short employment history. If you are told only that you didn’t meet its “minimum standards,” this could be a red flag for discrimination.
A copy of the credit report
If the lender says it rejected you because of information in your credit report, it must give you the contact details of the relevant credit agency. You are entitled to a free copy of that report if you request it from the relevant agency within 60 days.
A copy of the property appraisal.
If the lender gives this as a reason for your rejection, you are entitled to request a copy and to check that it doesn’t contain any discriminatory information, such as negative assumptions about the neighborhood’s ethnic makeup.
Complain to the Lender
If, after reviewing the lender’s written explanation and other documentation, you believe you have been discriminated against, you should call, email or mail the lender to complain. Keep in mind that many lenders have hundreds or even thousands of agents and brokers working on their behalf, and that if you have been the victim of discrimination – it may be the work of one bad apple in the company, and not necessarily the fault of the lender itself. In some cases, the lender might be able to resolve your complaint without you having to bring third parties into the picture. The best mortgage lenders are reputable and take customer service seriously--they will not tolerate discrimination and will address your concerns.
Complaining to the State
If the lender doesn’t take your complaint seriously, the State Attorney General’s Office might be willing to look into the matter. States have the power to crack down on discriminatory lenders, as was the case in 2015 when New York State required Evans Bank and Evans Bancorp to end unlawful discriminatory mortgage practices against borrowers in mainly African-American neighborhoods in Buffalo’s East Side. Under an agreement between the state and lender, Evans was required to include the East Side in its lending areas and establish a fund to promote home ownership in Buffalo. While such cases of systematic discrimination are thankfully rare and limited to certain lenders, your State Attorney General’s Office should be able to help you determine if a lender has broken any discrimination laws – and might be able to advise on your next step.
Complaining to the Federal Authorities
The Consumer Financial Protection Bureau (CFPB) oversees all Equal Credit Opportunity Act violations, and the Department of Housing and Urban Development (HUD) oversees Fair Housing Act violations. If a lender discriminates against you because of race or color, age, religion, national origin, sex, marital or family status, then chances are they have violated both acts. To complain to the CFPB, go to www.consumerfinance.gov or call 855-411-2372. To complain to HUD, go to www.hud.gov/complaints or call 1-800-669-9777 or 1-800-927-9275. Borrowers have 1 year to file a complaint with HUD, but the sooner you do it the better. You will need to provide your contact details and the details of the lender you’re complaining about, along with a description of why you think your rights were violated. HUD will give the lender a chance to respond and will then determine whether you have been discriminated against. It will let you know if it cannot finish an investigation within 100 days of receiving your complaint.
Finding a Better Lender
Before making a formal mortgage application, it’s worth researching and reading reviews of the many lenders out there on the market – including our reviews of top mortgage lenders, such as Quicken Loans and J.G. Wentworth, and of online mortgage marketplaces, such as Lending Tree and Bills.com. A good mortgage lender will take care of its customers and will not engage in the illegal practice of mortgage discrimination.
You should also check that your chosen lender is committed to federal anti-discrimination laws. Most good lenders announce this in the disclosures section of their website. The selection of great lenders who are committed to fair practices is vast, so ask around and check out these reviews for more information.