When you apply for a mortgage (whether to purchase, refinance, or for
home improvement purposes), two important federal laws protect you from
being discriminated against. These are the Equal Credit Opportunity Act
(ECOA) and the Fair Housing Act (FHA).
These two laws cover some of the same practices, but have important
differences. For example, although you can't be rejected for a mortgage
because of your race or ethnic background under either law, the ECOA
specifically protects you against discrimination because of your age
while the FHA also protects you if you have a handicap.
Your Specific Rights Under ECOA
The ECOA prohibits discrimination in any aspect of a credit transaction
* 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
* The applicant's exercise, in good faith, of any right under the
Consumer Credit Protection Act, the umbrella statute that includes ECOA.
Your Specific 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.
* Selling or renting a dwelling.
The FHA 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).
Because both the ECOA and the FHA apply to mortgage lending, lenders may
not discriminate in mortgage lending based on any of the prohibited
factors in either list. For example, mortgage lenders:
* Cannot discourage you from applying or deny you a mortgage because of
your race, national origin, religion, sex, marital status, age, or
because you receive public assistance income.
* Cannot consider your race, national origin, religion, 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.
* Cannot impose different terms or conditions (such as a higher
interest rate or larger downpayment) on a loan for reasons relating to
the applicant's race or sex or other prohibited factors.
* Cannot consider the race of the people who live in the neighborhood
where you want to buy a house.
* Cannot, when appraising property, consider the race of people living
in the neighborhood where the property is located.
* Cannot ask about your plans for having or raising children, (but may
ask about dependent related expenses).
* Cannot refuse to purchase a loan or set different terms or conditions
for purchasing a loan based on discriminatory factors.
* Must consider reliable public assistance income in the same way as
* Must consider reliable income from part-time employment, Social
Security, pensions, and annuities.
* Must consider reliable alimony, child support, or separate
maintenance payments, if you choose to disclose this information. A
lender may ask you for proof that this income is received consistently.
* Cannot require you to have a co-signer for the loan, if you alone
meet the lender's standards.
* Must accept as a co-signer, if one is needed, someone other than your
spouse, if you so choose. (If you own the property with your spouse, he
or she may be asked to sign documents permitting you to mortgage the
How to Strengthen Your Mortgage Application
Not everyone who applies for a mortgage will get one. Lenders can use
factors such as income, expenses, debts, and credit history to judge
But there are steps you can take to ensure that your application gets
full consideration. Make sure to show the lender all information that
supports your application.
For example, stable employment is important to many lenders. Perhaps
you've changed jobs recently, but have been employed steadily in the
same field for several years. If so, provide that information on your
Obtain a copy of your credit report before you apply for a mortgage.
Sometimes the credit report is inaccurate. For example, accounts might
be reported that do not belong to you or paid accounts might be reported
as unpaid. If you find errors, dispute this with the credit bureau and
tell the lender of the dispute.
Sometimes past problems paying bills on time were caused by unique
circumstances, such as loss of a job or unusually high medical expenses,
and do not indicate a pattern that will continue in the future. If that
is the case, write a letter to the lender explaining what caused your
past credit problems. Lenders must consider this information at your
Trying to Get the Best Loan Terms
Some mortgage lenders may attempt to charge more to some borrowers than
to others for the same loan product offered at the same time. This may
take the form of higher interest rates or origination fees or more
points. You may want to ask the lender if the rate being quoted to you
is the lowest offered that day. The loan officer is probably basing the
loan offer on the list of mortgage rates issued frequently by that
company to its loan officers. Ask to see this list. If the lender will
not show you this, and you suspect you are not being offered the lowest
rates or points available, you may want to negotiate for better terms or
shop for another lender.
What To Do If Your Mortgage Application Is Rejected
If your mortgage application is rejected, the lender either must give
you specific reasons why or tell you of your right to ask for them.
Under the law, 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 generally must
tell you so 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. (A specific reason
might be: "your income was too low" or "you haven't been employed long
enough." You are entitled to more than vague reasons like "you didn't
meet our minimum standards.")
* Learn the specific reason why you were offered less favorable terms
than you applied for -- if you reject these less favorable terms. (For
example, the lender offered you a smaller mortgage or a higher interest
* 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 and address
of the credit bureau. You can get a free copy of that report from the
credit bureau if you request it within 30 days. (Otherwise, the credit
bureau can charge a reasonable fee.) If you find incorrect information
in the report, know that the credit bureau is required to investigate
items that you dispute. If you still dispute the credit bureau's account
after its investigation, you also can include your summary of the
problem in the credit report.
* Obtain a copy of the property appraisal report from the lender, if
the appraisal was done in connection with your mortgage application.
(The lender may charge for this if you have not already paid for the
appraisal.) Mortgage applications may be turned down because of poor
appraisals. Review the appraisal to see if the information it contains
is accurate and whether the appraiser considered illegal factors, such
as the racial composition of the neighborhood.
What You Can Do If You Suspect Discrimination
If you feel that the lender has not treated your mortgage application
fairly because of your race, national origin, religion, sex, marital
status, age, family status, handicap, or because you receive public
assistance income, you can take several steps.
* 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
* Contact a local private fair housing group.
* 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 consulting with an attorney about the possibility of
bringing a case in Federal district court under the ECOA or FHA. 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 lawyer's fees and court costs. You also might
consider joining with others to file a class action suit.
A number of federal agencies share responsibility for the enforcement of
these Acts. Determining the appropriate agency to contact depends, in
part, on the type of financial institution you dealt with.
For violations of the ECOA involving mortgage companies and consumer
Federal Trade Commission Correspondence Branch Washington, DC 20580
While the FTC does not resolve individual complaints, the agency does
use consumer comments to decide which companies to investigate.
For violations of the Fair Housing Act, contact: Office of Fair Housing
and Equal Opportunity U.S. Department of Housing and Urban Development
(HUD) Room 5204 Washington, DC 20410-2000 (Toll-free hotline: 1-800-424-
8590. TDD: 1-800-543-8294)
You have one year to file a complaint with HUD, but you should file as
soon as possible. Your complaint to HUD should include:
* Your name and address.
* The name and address of the person or company who is the subject of
* The address or other identification of the housing involved.
* A short description of the facts that caused you to believe your
rights were violated.
* The dates of the alleged violation.
HUD will notify you when it receives your complaint. Normally, HUD also
* Notify the alleged violator of your complaint and permit the person
to submit an answer.
* Investigate your complaint and determine whether there is a
reasonable cause to believe the Fair Housing Act has been violated.
* Notify you if it cannot complete an investigation within 100 days of
receiving your complaint.
For violations of the FHA or ECOA, contact:
For nationally-charted banks:
Comptroller of the Currency Compliance Management
Mail Stop 7-5
Washington, DC 20219
For state-chartered banks insured by the Federal Deposit Insurance
Corporation, but not members of the Federal Reserve System:
Federal Deposit Insurance Corporation
Consumer Affairs Division
Washington, DC 20429
For federally-chartered or federally-insured savings and loans:
Office of Thrift Supervision
Consumer Affairs Program
Washington, DC 20552
For federally-chartered credit unions:
National Credit Union Administration
Consumer Affairs Division
Washington, DC 20456
For state member banks of the Federal Reserve System:
Consumer and Community Affairs
Board of Governors of the Federal Reserve System
20th & C Streets, NW
Washington, DC 20551
For discrimination complaints against all kinds of creditors:
Department of Justice
Civil Rights Division
Washington, DC 20530
For More Information
If you have questions about the Equal Credit Opportunity Act or your
credit rights, write: Correspondence Branch, Federal Trade Commission,
Washington, DC 20580.
Excerpted from material prepared by the Federal Trade Commission 12/94
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