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Fair Lending Practices

Fair lending practices are incorporated into several federal and state laws that make it illegal for lenders to discriminate based on race, color, religion, age, sex, or national origin.

The Home Mortgage Disclosure Act, the Equal Credit Opportunity Act, the Federal Fair Housing Act, the Housing Financial Discrimination Act, and other laws are incorporated to enforce fair lending practices.

The Housing Financial Discrimination Act:

  • Known as the Holden Act, it is intended to prevent discrimination in housing accomodations such as improved or unimproved real estate that is used or intended to be used as a residence, will be occupied by the owners, and not be more than four units.
  • A lender is not allowed to discriminate based on race, color, religion, sex, age or national origin regarding the availability of financial assistance for the purpose of improvements, rehabilitation, purchasing, construction, or refinancing.
  • Lenders cannot deny loans or adversely vary the terms of loans due to conditions or trends in the neighborhood that are unrelated to the credit history of the applicant.
  • A lender cannot utilize inconsistent appraisal practices in determining whether the loan is granted to individuals due to their race, color, religion, sex, age or national origin.

The Equal Credit Opportunity Act:

  • A lender is obligated to notify a borrower of it's intentions concerning a loan within a specified period of time, usually thirty days, after a loan application has been received.
  • If there are adverse actions from the lender, the borrower is entitled to a written statement as to why the action was taken. An adverse action is in the form of a denial, revocation of credit, a refusal of credit, or a change in terms of an existing credit arrangement or other status.
  • The lender is subject to punitive damages and actual damages if it fails to comply.

The Home Mortgage Disclosure Act:

    • The Secretary of the Business, Transportation, and Housing Agency investigates and monitors the lending practices and patterns of lenders.
    • The Secretary may take actions if it is found that the lender willfully discriminated on any individual based on race, color, sex, religion, age, or national origin.
    • Is a lender is found to have engaged in such discriminatory practices and patterns that violate the law, the Secretary can reccomend that state funds be withheld from the lender.
    Together, these separate acts work hand in hand to prohibit discrimination by lenders and those involved in the mortgage industry and to set a standard of fair play for all citizens, regardless of race, color, religion, age, sex, or national origin.

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