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Protected Classes

Voluntary Answering

These questions are research. They collect information on what groups are getting financed and buying property.

  • Race or color.
  • Religion.
  • National origin.
  • Sex (including gender)*
  • Marital status.
  • Age (as long as you are old enough to enter into a contract)
  • Receipt of income from any public assistance program.
  • Exercising in good faith your rights under the Consumer Credit Protection Act.

Redlining 

The refusal to offer credit or insurance in certain neighborhoods. 

Reverse redlining 

A practice in which lenders specifically market high cost or predatory loans to potential customers based on factors such as race or ethnicity. Reverse redlining is a form of discrimination not because it excludes minorities and other vulnerable populations, but because it targets and exploits them by offering loans with abusive terms and conditions.

 

Fair Lending

The prohibition against unlawful discrimination in lending. The Fair Housing Act prohibits discrimination on the basis of race, color, religion, national origin, sex, familial status, or disability.

In addition, the Equal Credit Opportunity Act (which is not administered by HUD).

Discrimination in mortgage lending is prohibited by the federal Fair Housing Act and HUD’s Office of Fair Housing and Equal Opportunity actively enforces those provisions of the law. The Fair Housing Act makes it unlawful to engage in the following practices based on race, color, national origin, religion, sex, familial status or handicap (disability):

  • Refuse to make a mortgage loan or refinance a mortgage loan;
  • Refuse to provide information regarding loans;
  • Impose different terms or conditions on a loan, such as different interest rates, points, or fees;
  • Discriminate in appraising property;
  • Refuse to purchase a loan or set different terms or conditions for purchasing a loan; and
  • Discriminate in providing other financial assistance for purchasing, constructing, improving, repairing, or maintaining a dwelling or other financial assistance secured by residential real estate.

 
 
 

Equal Credit Opportunity Act (ECOA)

The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the Equal Credit Opportunity Act (ECOA), which prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because you get public assistance. Creditors may ask you for most of this information in certain situations, but they may not use it when deciding whether to give you credit or when setting the terms of your credit. Not everyone who applies for credit gets it or gets the same terms: Factors like income, expenses, debts, and credit history are among the considerations lenders use to determine your creditworthiness.

The law provides protections when you deal with any organizations or people who regularly extend credit, including banks, small loan and finance companies, retail and department stores, credit card companies, and credit unions. Everyone who participates in the decision to grant credit or in setting the terms of that credit, including real estate brokers who arrange financing, must comply with the ECOA.

Federal law requiring creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or because all or part of the applicant’s income is derived from any public assistance program, or because the applicant has, in good faith, exercised any right under the Consumer Credit Protection Act.

When You Apply For Credit, Creditors May Not…

  • Discourage you from applying or reject your application because of your race, color, religion, national origin, sex, marital status, age, or because you receive public assistance.
  • Consider your race, sex, or national origin, although you may be asked to disclose this information if you want to. It helps federal agencies enforce anti-discrimination laws. A creditor may consider your immigration status and whether you have the right to stay in the country long enough to repay the debt.
  • Impose different terms or conditions, like a higher interest rate or higher fees, on a loan based on your race, color, religion, national origin, sex, marital status, age, or because you receive public assistance.
  • Ask if you’re widowed or divorced. A creditor may use only the terms: married, unmarried, or separated.
  • Ask about your marital status if you’re applying for a separate, unsecured account. A creditor may ask you to provide this information if you live in “community property” states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. A creditor in any state may ask for this information if you apply for a joint account or one secured by property.

Ask for information about your spouse, except:

  • if your spouse is applying with you;
  • if your spouse will be allowed to use the account;
  • if you are relying on your spouse’s income or on alimony or child support income from a former spouse;
  • if you live in a community property state.
  • Ask about your plans for having or raising children, but they can ask questions about expenses related to your dependents.
  • Ask if you get alimony, child support, or separate maintenance payments, unless they tell you first that you don’t have to provide this information if you aren’t relying on these payments to get credit.

A creditor may ask if you have to pay alimony, child support, or separate maintenance payments.

When Deciding To Grant You Credit Or When Setting The Terms Of Credit, Creditors May Not…

  • Consider your race, color, religion, national origin, sex, marital status or whether you get public assistance.
  • Consider your age, unless:
  1. you’re too young to sign contracts, generally under 18;
  2. you’re at least 62, and the creditor will favor you because of your age;
  3. it’s used to determine the meaning of other factors important to creditworthiness. For example, a creditor could use your age to determine if your income might drop because you’re about to retire;
  4. it’s used in a valid credit scoring system that favors applicants 62 and older. A credit scoring system assigns points to answers you give on credit applications. For example, your length of employment might be scored differently depending on your age.

Can not consider whether you have a telephone account in your name.

A creditor may consider whether you have a phone.

When Evaluating Your Income, Creditors May Not…

  • Refuse to consider reliable public assistance income the same way as other income.
  • Discount income because of your sex or marital status. For example, a creditor cannot count a man’s salary at 100 percent and a woman at 75 percent. A creditor may not assume a woman of childbearing age will stop working to raise children.
  • Discount or refuse to consider income because it comes from part-time employment, Social Security, pensions, or annuities.
  • Refuse to consider reliable alimony, child support, or separate maintenance payments. A creditor may ask you for proof that you receive this income consistently.

You Also Have The Right To…

  • Have credit in your birth name (Mary Smith), your first and your spouse’s last name (Mary Jones), or your first name and a combined last name (Mary Smith Jones).
  • Get credit without a cosigner, if you meet the creditor’s standards.
  • Have a cosigner other than your spouse, if one is necessary.
  • Keep your own accounts after you change your name, marital status, reach a certain age, or retire, unless the creditor has evidence that you’re not willing or able to pay.
  • Know whether your application was accepted or rejected within 30 daysof filing a complete application.
  • Know why your application was rejected. The creditor must tell you the specific reason for the rejection or that you are entitled to learn the reason if you ask within 60 days. An acceptable reason might be: “your income was too low” or “you haven’t been employed long enough.” An unacceptable reason might be “you didn’t meet our minimum standards.” That information isn’t specific enough.
  • Learn the specific reason you were offered less favorable terms than you applied for, but only if you reject these terms. For example, if the lender offers you a smaller loan or a higher interest rate, and you don’t accept the offer, you have the right to know why those terms were offered.
  • Find out why your account was closed or why the terms of the account were made less favorable, unless the account was inactive or you failed to make payments as agreed.
 
 
 

Fair Credit Reporting Act (FCRA)

A consumer protection law that regulates the disclosure of consumer credit reports by consumer credit reporting agencies and establishes procedures for correcting mistakes on one’s credit record. FCRA can be found in 15 U.S. Code section 1681, et seq.

 
 
 

Truth in Lending Act  (TILA) – Regulation Z (Reg. Z)

Regulation Z (Truth in Lending Act) requires the lender at the time of loan application to disclose who the lender is, the payment schedule for the loan, prepayment clauses (if any), late payment charges, insurance required, filing fees, collateral that will be required, required deposits, assumability, balloon payment if any, total sales price, adjustable rate features if any, and an itemization of the amount financed.

Truth In Lending Act (TILA) – A federal law designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs.

Trigger Terms

Five items in advertising that, if used, trigger full financial disclosure in the advertisement.

They are

  1. down payment amount or percent,
  2. number of payments,
  3. payment amount,
  4. period of repayment (life of the loan), and
  5. the finance charge (interest rate) or lack thereof.

Right of Rescission.

A borrower’s right to rescind a consumer loan (non-1st mortgage) in which real estate is used for collateral. 

Three days for most, five days for timeshares.

 
 
 

Real Estate Settlement Procedures Act (RESPA)

The Real Estate Settlement Procedures Act (RESPA) provides consumers with improved disclosures of settlement costs and to reduce the costs of closing by the elimination of referral fees and kickbacks.

RESPA covers loans secured with a mortgage placed on one-to-four family residential properties. Originally enforced by the U.S. Department of Housing & Urban Development (HUD), RESPA enforcement responsibilities were assumed by the Consumer Financial Protection Bureau (CFPB) when it was created in 2011.

Good Faith Estimate (GFE)

  • RESPA requires an estimate within three days of loan application of all closing costs. Must be within specified accuracy when compared with actual closing costs.
  • It is an estimate of charges or range of charges that a prospective borrower is likely to incur in financing a home.
 
 
 

TILA-RESPA Integrated Disclosures (TRID)

The lender must provide a Loan Estimate to the consumer, either by delivering by hand or placing it in the mail, no later than three business days of the receipt of an application.

An application is considered received when the consumer provides the following information:

  • Consumer’s name
  • Consumer’s income
  • Consumer’s Social Security number to obtain a credit report
  • Address of the property
  • An estimate of the value of the property
  • The mortgage loan amount sought.

Three Business Days

Three Pages

The Loan Estimate is a form that took effect on Oct. 3, 2015. 

The form provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan. The Loan Estimate also gives you information about the estimated costs of taxes and insurance, and how the interest rate and payments may change in the future. In addition, the form indicates if the loan has special features that you will want to be aware of, like penalties for paying off the loan early (a prepayment penalty) or increases to the mortgage loan balance even if payments are made on time (negative amortization). If your loan has a negative amortization feature, it appears in the description of the loan product.

The form uses clear language and design to help you better understand the terms of the mortgage loan you’ve applied for. All lenders are required to use the same standard Loan Estimate form. This makes it easier for you to compare mortgage loans so that you can choose the one that is right for you.

When you receive a Loan Estimate, the lender has not yet approved or denied your loan application. The Loan Estimate shows you what loan terms the lender expects to offer if you decide to move forward. If you decide to move forward, the lender will ask you for additional financial information.

 

The Loan Estimate

Revised Loan Estimate

When there is a changed circumstance after the Loan Estimate has been provided, the creditor can revise the Loan Estimate within three business days.

A revised Loan Estimate generally can be provided no later than seven business days before consummation.

 

Closing Disclosure

Out of the numerous documents that you will come across during the mortgage process, your Closing Disclosure is most important. This 5-page document specifies your home loan terms, such as your monthly payments, interest rates, and closing costs.

 
 
 

Usury

They are charging interest above the rate set by law.

Bait-and-Switch

An illegal (Truth-in-Lending) advertising gimmick offers property that is not available to trick buyers into a different property. Typically, it provides low-priced property but has only higher-priced properties available.

Predatory lending – The use of abusive and exploitative lending practices extracts equity from a homeowner’s home and increases indebtedness. This type of lending violates federal fair lending laws if it targets members of protected classes for harsher treatment and conditions. 

 

Banks buy and sell from each other on the secondary mortgage market.

Redlining is when a bank refuses to give mortgage loans in a neighborhood because of a protected class concentration.

If three banks independently refuse to give a person a mortgage loan because the property neighborhood’s economic factors are deteriorating, it is not redlining. The decision was not based on a protected class.

A borrower is entitled to a three day right of rescission if his loan is on the residence where he lives. 

If the bank cannot recover the amount due in a foreclosure, they may sue the mortgagor with a deficiency judgment.

The secondary mortgage market does not originate loans.

It is permissible for a lending institution to refuse a loan based on income.

On a promissory note, the purchase price does not appear.

A mortgage banker lends his own money. He cannot prepare an appraisal for a fee.

Novation is the substitution of one party for another on loan.