The federal fair lending laws – the Equal Credit Opportunity Act and the Fair Housing Act – prohibit discrimination in credit transactions, including transactions related to residential real estate.
Fair Lending Statutes and Implementing Regulations
The Equal Credit Opportunity Act (ECOA), which is implemented by the Board's Regulation B (12 CFR 202), prohibits discrimination in any aspect of a credit transaction. It applies to any extension of credit, including residential real estate lending and extensions of credit to small businesses, corporations, partnerships, and trusts.
The ECOA prohibits discrimination based on:
- 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 program
- The applicant's exercise, in good faith, of any right under the Consumer Credit Protection Act.
The Fair Housing Act (FHAct), which is implemented by HUD regulations (24 CFR 100), 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
- Selling or renting a dwelling
The FHAct prohibits discrimination based on:
- Race or color
- National origin
- Familial status (discrimination against households having children under the age of 18 living with a parent or legal custodian, pregnant women, or persons with legal custody of children under 18)
Because both the FHAct and the ECOA apply to mortgage lending, lenders may not discriminate in mortgage lending on the basis of any of the prohibited factors listed previously. In addition, with respect to residential real estate-related lending, under both laws, a lender may not, on the basis of a prohibited factor,
- Fail to provide information or services relating to, or provide different information or services relating to, any aspect of the lending process, including credit availability, application procedures and 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, and type of loan
- Use different standards to evaluate collateral
- Treat borrowers differently when servicing loans or invoking default remedies
- Use different standards for pooling or packaging a loan in the secondary market based on a prohibited factor
A lender may not express, orally or in writing, a preference that is based on a prohibited factor or indicate that it will treat applicants differently on the basis of a prohibited factor. Moreover, 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 neighborhood or other area in which the 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.
Please visit the Federal Financial Institutions Examination Council (FFIEC) website for the Interagency Fair Lending Examination Procedures.